07.14.10 6:59 AM ET
Did BP Free the Lockerbie Bomber?
CEO Tony Hayward was blindsided by the fury over the company’s role in the release of Abdel Basset al Megrahi—which former CEO John Browne took credit for. Tom Bower, author of Oil, Money, Politics, and Power in the 21st Century, on what it means for the Gulf.
BP CEO Tony Hayward was taken by surprise Tuesday by several U.S. senators' call for an investigation into BP's role in seeking the premature release of Abdel Basset al Megrahi, convicted in 2001 for the bombing of a Pan Am flight over Lockerbie in Scotland. Beleaguered by the continuing Gulf oil spill, caused in part by the legacy of John Browne, BP's former CEO, Hayward finds himself stuck with another poisoned inheritance from Browne—who personally flew to Libya several times with MI-6 officers to secretly negotiate access to Libya's oil. The deal, announced in 2004 by Tony Blair, was hailed as a breakthrough.
BP officially admits that it made representations in 2007 to the British government about the slow progress of al Megrahi's release.
Unofficially, the corporation points out that the Bush administration was party to the comprehensive deal with Col. Muammar Gaddafi to renounce nuclear bombs and open up Libya's oil fields to American oil companies. Shell, ExxonMobil, Hess, and other oil companies beat BP in getting Libyan oil licenses. Rex Tillerson, the current head of ExxonMobil, personally met Gaddafi in 2005, to begin negotiations. All welcomed BP's success without knowing all the details.
11 Ways to Save the Gulf
• Gulf Oil Spill Full Coverage Al Megrahi was released in August 2009 on compassionate grounds that his prostate cancer would kill him within three months. Last week, Dr. Karol Sikora, a controversial oncologist who made the original diagnosis, admitted he might have been mistaken and the ex-Libyan intelligence officer “could live for another 10 years.” Senator Frank Lautenberg has called for an investigation into whether BP lobbied the British government to prematurely release al Megrahi as part of a deal to get access to Libyan oil. The corporation admits mentioning al Megrahi's continued incarceration as a block to an oil deal.
Al Megrahi was released by the Scottish government under pressure from then-British Prime Minister Gordon Brown. Currently BP lacks the political clout in Washington to fight the senators’ campaign, but will urgently seek help from allies.
Browne, blamed for the financial cuts which led to BP's weak safety and maintenance regime, took praise for the Libya deal in 2004. But since the Gulf disaster started, he has refused to comment in detail about his responsibility. The corporation officially admits that it made representations in 2007 to the British government about the slow progress of al Megrahi's release.
BP executives in London see the Libyan issue as an unwelcome sideshow. They are focused on their serious expectation that the corporation is nearing the end of the oil leak in the Gulf of Mexico. On Wednesday morning, the company called off around-the-clock tests on a metal cap placed over the leaking well on Monday that would reveal whether the leak can be immediately and permanently stopped. The 18-foot cap, according to the corporation's spokesman Tuesday night, can withstand the pressure of the gushing oil. The only question is whether the oil will escape through fractures in the well's steel casing into the surrounding silt and rock. If there is a risk of leaks, the corporation will be forced to rely on the relief well—now nearing its target 18,300 feet below the sea bed—to pour cement into the rogue well to terminate the flow of oil. That solution would be executed in early August.
Buoyed by the corporation's optimism, BP's stock price has soared by 30 percent in the past week. But the corporation also attributes the rise to the tours by Hayward and other senior directors to China, Russia, Azerbaijan, and the oil-rich states in the Persian Gulf. Hayward's message has been that BP will survive and that investors should exploit the opportunity of low share prices to buy on the market. Hayward rejected the idea of issuing stock to a new stakeholder. The corporation does not expect a hostile bid—ExxonMobil has been mentioned—until the share price is higher; by then the break would be lost. Any bid would be subject to an exhaustive inquiry by the Federal Trade Commission and, without BP's agreement, would likely fail.
The fight to rebuild the company’s reputation is secondary to shoring up its balance sheet. Negotiations to sell $10 billion of assets are expected to conclude by July 27 when the quarterly results are due. BP is not quitting Alaska, but negotiating to sell a stake of its holdings to Apache, a relatively small corporation without the expertise to manage the extraction and transportation of oil in the region. With oil supplies dwindling, Alaska is no longer the same jewel it was in the 1990s. Adding together other potential sales in Argentina and Asia, BP expects to exceed the $10 billion target, and so will pick the best deal.
The new losers are the British and American governments. BP will deduct its $20 billion costs against tax and that's a direct loss to revenue.
Tom Bower is the author of Oil, Money, Politics, and Power in the 21st Century.