Another humiliation for BP

The bad news keeps on coming for BP. The oil giant has been slapped with a $373m fine by the US Department of Justice, just days after new chief executive Tony Heyward admitted to a 45% drop in its profits last quarter.

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Last Updated: 31 Aug 2010

The penalty covers the three biggest skeletons in BP’s closet. It was fined just over $300m for the 2003 price-fixing scam, when four BP workers conspired to manipulate the price of propane, and a further $50m for the Texan refinery explosion in 2005 – both record fines of their type. There was also a further $20m charge for the Alaskan pipeline leaks last year.

The Environment Protection Agency was not pulling any punches yesterday, saying BP had committed ‘serious environmental crimes…with terrible consequences for people and the environment’. Not surprisingly, BP America chairman Bob Malone was in full grovel mode.

And the pain is likely to keep on coming. The company has already shelled out $1.6bn settling personal injury claims over the Texan explosion (which killed 15 people and injured 170 more) but with more cases still pending, the final compensation figure is likely to be even higher. The only minor consolation is that at least BP won’t face criminal charges over the whole debacle now.

The irony is that BP is managing to lose money even as oil prices hit record levels. The price of a barrel topped $92 this morning, amid continuing worries over the Iran situation and Turkey’s row with Kurdish separatists. At the start of the year it was trading at $50 a barrel – now it could be double that by Christmas.

So it’s not exactly an ideal situation for new boss Heyward. Despite the recent scandals and the ignominious manner of his exit, Lord Browne’s overall record at the helm of BP was always going to be a tough act to follow – now Heyward has to do it while sacking a load of its staff and attempting to restore the company’s battered reputation.

Now there’s a man in need of some good PR.

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