Mark Kleinman: O’Neill’s mission is to take BP back to the future
Mark Kleinman is Sky News’ City Editor and the man who gets the Square Mile talking in his Morning Wire column
O’Neill’s mission is to take BP back to the future
In one sense it’s a baptism of fire – in another, hardly at all. Meg O’Neill’s arrival yesterday as the first female chief executive of BP comes, in a sense, at an auspicious moment.
Oil majors’ earnings are set for a significant windfall from the conflict in Iran, with those of BP and Shell forecast to see a combined £5bn this year – and that’s if the war is limited in timeframe.
That cannot mask, though, the scale of the task facing O’Neill, who arrives from Australia’s Woodside Petroleum with a formidable reputation for rapid, hard-nosed corporate decision-making.
“Right now, we’re operating in an environment of significant complexity: geopolitical tension, conflict, rapid technological change and shifting global energy demand,” she told colleagues yesterday.
“There’s always more to do and I believe we can safely accelerate performance and drive innovation, sustainability and growth.”
BP needs it now more than ever. Its target for reducing net debt to $14bn-$18bn by the end of 2027, partly driven by asset sales, may be within reach a year early, but that will do little to address the more fundamental questions being posed by the company’s shareholders: how to shape a strategy which returns it to long-term sustainable growth.
O’Neill’s predecessor, Murray Auchincloss, was resistant to big strategic decisions that would shift BP away from the diversified energy group it had become and back towards its roots as a more focused – but smaller – oil and gas exploration and production company.
His new chairman, the former CRH boss Albert Manifold, had no truck with that resistance, repeatedly telling investors that he wanted to drive radical change at BP to improve its performance.
“That’s how we make bp simpler, stronger and more valuable,” O’Neill wrote yesterday. “I’m committed to providing clear direction and consistency so we can move forward together with confidence.”
The Iran war has put the wind in BP’s sails, with its shares up by nearly half since her appointment was announced. Investors will want rapid evidence of O’Neill’s strategic vision, though, to be convinced that her arrival isn’t yet another false dawn.
Third runway row underlines Heathrow white elephant risk
Ever seen a flying white elephant? That was the unfortunate visual metaphor prompted last week by the extraordinary intervention from Heathrow Airport warning that the cost of a third runway could yet spiral out of control without “real-time, independent” oversight.
This resembled something of a gift to airlines which have been bitterly arguing that the potential bill for the new runway was likely to far exceed the £48bn expansion (or £33bn, excluding the additional cost of terminal redevelopment) budgeted for by Heathrow.
Indeed, the industry-funded pressure group Heathrow Reimagined (whose members include British Airways’ parent company, IAG) recently floated the prospect of an eventual bill totalling more than £100bn. Given that airlines bear the bulk of cost overruns deemed to be outside the airport’s control, their alarm at such a figure (which Heathrow says is not rooted in fact) is understandable.
Last weekend, The Sunday Times highlighted the soaring cost of redeveloping tunnels at the airport, citing a report prepared for Heathrow saying the price tag had ballooned to almost nine times the original estimate of £66m.
“Highlighting one or two projects ignores Heathrow’s strong overall performance,” the airport said in response.
Rachel Reeves, the chancellor, has already given Heathrow expansion her backing, saying in January last year that it would make the UK “more open and more connected”. That makes the prospect of it not being commissioned at all remote, with ministers desperate to point to any infrastructure projects oriented towards delivering long-term economic growth.
Cost mishaps like the tunnelling one, though, can only reinforce suspicions that another gigantic white elephant is gestating, despite Heathrow’s comment to the Civil Aviation Authority that it wants to avoid “the mistakes of previous megaprojects like HS2”. Who doesn’t?
Football regulator will take settlement into injury time
Talk about going into injury time. It’s more than two-and-a-half years since Premier League clubs last formulated a comprehensive proposal aimed at reaching a financial redistribution settlement with the English Football League. That deal – worth about £925m over six years – was never formally put to the 72 clubs in the Championship, League One and League Two, and ultimately withered on the footballing vine.
Now, though, the impetus for a deal has returned, with interest. At a meeting of top-flight clubs last month, the Premier League chief executive Richard Masters told the assembled executives that they should be minded to agree a deal with the EFL before the Independent Football Regulator publishes its draft ‘State of the Game’ report in the autumn.
In this respect, at least, the stick wielded by David Kogan, the watchdog’s chairman, is working. One executive said they had been left in no uncertain terms by Kogan that “a deal has got to be done”.
Masters’ rider during the meeting with clubs, though, was that there had to be a willing and flexible counterparty to the talks in the form of the EFL. Rick Parry, the EFL chair, has long argued, though, that the use of the regulator’s backstop power might well produce a more desirable outcome for the lower league clubs. Kogan and his team should start getting their battle-armour ready.