Should the oil majors break themselves up?

The energy industry continues to pore over the shake-up to BP’s safety division, which was announced yesterday, just two days before Bob Dudley takes over as chief executive.

Several, including our energy editor Sylvia Pfeifer, point out Dudley’s focus on safety is hardly revolutionary – Tony Hayward made very similar noises when he took over. Over at Fuel Fix, however, they point to a happier precedent – Exxon’s largely successful attempts to improve its record following the Exxon-Valdez accident.

One of the most interesting aspects of the reshaping of BP’s top teams is that Dudley has penetrated “Fortress E&P”, the company’s powerful, and almost semi-autonomous exploration unit. First, he will remove its chief, Andy Inglis; secondly, he will split the unit into three; and thirdly, and most importantly, he will put staff from the safety side of the business into each of the new units.

All this, say observers, is aimed at bringing E&P back firmly within the control of the CEO. Does this signal anything about Dudley’s wider strategic intentions about where to take the group? It’s too early to tell.

Some in the City believe the company should consider more drastic action. Alastair Syme and Jan Laubjerg from Nomura have been arguing for a while that all the oil majors, not just BP, should consider splitting their upstream and downstream assets. This is what Syme says:

It is a case of saying, “Our legacy business is a cash cow and pays a dividend. But alongside that we have got good people, expertise and technology and that is being undervalued by the market. The technology business would be smaller, but has growth potential, unlike the downstream business, and will be valued at a premium.”

As I explained yesterday, Syme believes this is part of wider change that needs to happen at BP, which could include a name change, because it will always be haunted by the legacy of the accidents at Texas City and in the Gulf.

It’s an interesting thought, and one that travels against the grain of the general move to rely on exploration units to provide growth potential for the parent company. But it’s worth pointing out that it is also an idea that has the potential to make decent money for some well-placed bankers.

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