BP shareholders looking for payback

Stephen Beard Aug 16, 2006

KAI RYSSDAL: A bottle of ketchup might cost you a couple of bucks. A barrel of oil is getting cheaper every day. Crude closed at $71.89 in New York. That oil field shutdown in Alaska didn’t affect US supplies as much as everyone feared. It has damaged BP, though. A group of American investors with a big stake in the company sued senior executives today. Alleged negligence is their cause of action. From London, Stephen Beard reports:

STEPHEN BEARD: The shareholders blame BP’s senior management for poor maintenance at Prudhoe Bay. They claim that senior executives including the CEO Lord Browne allowed one of the company’s prized assets to decay.

The lawsuit alleges that top executives were aware that a pipeline was corroding but they did nothing until earlier this month when a leak was detected. BP then closed down half the oil field’s production.

Charles Hammel campaigns on behalf of worried BP employees in Alaska. He says the lawsuit’s central claim is correct, that BP bosses knew about the corrosion a long time ago:

CHRIS HAMEL: Well, of course, they knew. But I don’t think they knew how bad it was. They knew it was there because I told them.

He also blames Alaska’s state regulator. He says since the state derives more than 80 percent of its revenue from oil companies, state officials have turned a blind eye to BP’s lax maintenance:

HAMEL: They have an advantage by letting BP save money because the state saves money whenever BP saves money. So they let ’em play Russian roulette. Now it’s paying the price.

Replacing the corroded pipes will cost the company up to $200 million. The shareholders’ lawsuit is another blow, says fund manager Justin Urquart-Stewart:

JUSTIN URQUART-STEWART: This is bad news on top of further bad news. And I suspect for BP this isn’t going to go away. I suspect there will be other lawsuits, particularly relating to environmental issues.

The company is already under federal investigation for a huge oil leak in Prudhoe Bay earlier this year. BP headquarters in London refused to comment.

In London, this is Stephen Beard for Marketplace.

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