Shareholders Plan To Oust BP Directors For Incompetance
Key investor groups who meet at the oncoming 14th April AGM of BP at the Excel Convention Centre in South East London will try to vote out the current management. Investors are not only dismayed at the lack of safety and transparency norms resulting in avoidable losses at the Gulf spill. They are also sore about the messy BP Rosneft deal for Arctic oil exploration that is facing legal challenge from the Russian billionaire shareholders who are also a part of TNK- BP, a joint venture company that accounts for a third of BP’s revenue. Another grouse is the very high remuneration paid out to the Ex CEO and several Directors, who were primarily responsible for the Gulf spill losses that could exceed $40 billion as per current estimates.
The shareholders planning the coup d’état this Thursday include the UK based Church Investor’s Group (CIG) who hold over $200million of BP stock and several others among the top fifty share holders of the company, including insurance majors and pension funds some who are keen not to be identified before the AGM.
The main grouse of investors is the faulty risk management procedures adopted by BP that escalated the risk and converted it into a major disaster. This resulted in missed dividends for 3 quarters and a 40% value erosion of the share. As per one share holder group, BP lacked a comprehensive well developed plan for risk mitigation and carried out unnecessary experiments that could have been avoided. Its risk response to Macondo spill appeared disjointed and unplanned.
Tanker Storage Should have Been Tried Out First
Ideally BP should have first done what it did last, instead of trying the dangerous and complex ‘top kill and junk shot’ operation. When an oil gusher goes out of control, any effort to cap it forcibly could pressurize the cemented wall and ocean floor and activate the gas hydrates and methane pockets. “If you lose the casing it’s game over” warned Chris Matthews Ex CEO of Shell as BP commenced its risk prone ‘top kill and junk shot’. The safe method of mitigation is to cut the leaking pipe and lead it away to the oil tankers. This ensures minimum spill into the ocean. BP employed this method finally but only after 5 million barrels was spilled into the sea. With the cost of storage in oil tankers at a mere 65 cents a barrel per month , the total cost of storage for 4 months would be possibly less than $20 million, while the alternate well was being drilled. Risk solutions are simple and inexpensive if planned and executed diligently. However if unplanned, they go out of control and the risk escalates.