BP is confronted with a devastating report n By Titus Kroder, Michael Gassmann, Olaf Preuss and Claus Hecking

Over the years, BP had built up an image of being an exemplary energy company. Refinery accidents, hair-raising negligence and safety lapses have destroyed this; now the company faces lawsuits that could run into the billions.

John Browne wanted to be a "Sun King." Not Louis XIV in Versailles, of course, but instead a manager who wanted, over the long term, to substitute highly polished solar cells and quietly murmuring windmills for the noisy, dirty business of pumping oil from the ground. He wanted to be a generator of green energy, someone who people sided with because he too was fighting climate change.  He was someone who thought "Beyond Petroleum" - and thus beyond oil.

Browne did become a "Sun King." A veteran of the industry called him that years ago though he meant it differently: a leader of industry with a tendency toward self-satisfaction and high-handedness, surrounded by groveling and fawning courtiers, and unable to see what was happening at the grassroots level. Down there where hair-raising breakdowns and carelessness had cost lives.

BP, whose reputation was as perhaps the most model energy company in the world, has gambled its good name away in record time.  It was an enterprise that was as profitable and efficient as the other leaders in this sector, yet it was also a leader in the path toward a more sustainable energy future. It was a multinational oil company, yet it also worked to improve solar energy technology. It was one of the first companies in the world to trade in greenhouse gas emission rights. The new sun-shaped logo of the firm still shines down on the head of the man who shaped this exemplary enterprise: Lord John Browne, the Sun King.

The somber reality has now been revealed in a 3,70-page report of an independent review panel that was called into being in the wake of the most serious industrial accident in the U.S. in the last decade: the disastrous explosion at the BP refinery in Texas City in March, 2005 that killed 15 and injured 200. "BP tended to have a short-term focus and does not have a proper safety management," it reads in the report of the group which was headed by former U.S. Secretary of State James Baker.

The report paints a picture of a board of directors drunk with success, an enterprise that earned billions - but that deliberately invested too little in safety measures. It reports on overworked refinery workers who fixed deficiencies in the equipment as if with "band-aids," because funds were not available or because they were trained inefficiently or not at all.

Some employees had worked up to 30 days of consecutive 12-hour shifts. "Important measures were simply delegated to the managers on site, without making clear the expectations and responsibilities," it further reads in the report.

According to reports in the media, the refinery manager at the time had taken pride, only a few days before the accident, that production was at its highest level ever. A safety guideline had read that it was not worthwhile to guarantee the maximum possible protection for the workers; in it, the value of a human life had been placed at $20 million.

At another refinery, workers reported that preventive maintenance was seldom practiced, and that the mentality was to run the equipment "until it crashes."

This apparently holds true for the Texas City refinery which BP had acquired eight years ago from its rival Amoco. When it was integrated into BP in 1998, it had already been bled dry. The maintenance costs had dropped by 40 percent since the early 1990s and capital investment by nearly 80 percent.  Despite this, BP management ordered the refinery to cut back another 25 percent.

Sir Browne, who announced his resignation four days before the panel report was issued, accepted the responsibility. "It took place on my watch," he vowed. "BP will change forever."

He will take early retirement at the end of July. Browne, the man with a string of successes, heralded as the most inspired business leader in Great Britain for having taking the faltering, if tradition-rich, BP enterprise and made a flagship out of it - and for having been the first Westerner to expand into Russia.

Under the slogan "Beyond Petroleum," Brown rejuvenated the enterprise with the help of a $200 million ad campaign, presenting it to the public as the greenest of the "sordid oil companies." That message was particularly popular in the U.S., the multinational's most important market. BP realizes 40 percent of its profits there, aided by some 12,000 BP gas stations as well as numerous oil exploration projects.

BP has completely destroyed this carefully constructed image in the last months. The Texas City disaster is by far not the only one; last March, 800,000 liters of oil leaked out of a BP pipeline and right into Alaska's fragile ecosystem. BP had let the pipe rust for years. A few months later, the company even had to stop production at the huge Prudhoe Bay oilfield after new breaks in the pipeline were discovered. Now investigations are also underway to see whether the company also engaged in price fixing. And 18 months after it was supposed to start operations, "Thunder Horse," the world's largest oil and gas platform in the Gulf of Mexico, still isn't pumping.

BP has become the bogeyman of the nation. By now, a variety of federal authorities, investigating committees, and the state of Alaska are all looking into the case of BP, and it has been discussed a number of times in the U.S. Congress. Emotions ran so high during hearings of the Energy Committee that Chairman Joe Barton called out "shame, shame!"

Amy Jaffee, an expert on energy issues at Houston's Rice University, complains that BP's "open commitment to sustainability" and its internal cost-cutting have led to a "decoupling."

The Baker report, seen against this background, bores into the heart of the enterprise. The report is the perfect foundation for claiming restitution through U.S. courts in amounts that could reach the billions. "The message of the report could not be clearer," Brent Coon, a victim's attorney, says. He has already won a $23 million award for a woman who lost both parents in Texas City, and he wants to bring another six cases to court in February.  Things may get even worse soon too. The Baker report, which BP had commissioned, precedes the official report expected to be released in March from the CSB, the independent federal agency charged with investigating industrial chemical accidents.

According to it, BP accepted that refinery accidents might occur. "Safety standards are set at the top," CSB head Carolyn Merritt has already criticized. "If that gets neglected, then the refinery workers pay for it." BP is readying itself for the worst, and has set aside $1.6 billion.

To this point, capital markets have responded astonishingly calmly, and BP's share price has hardly budged since the Baker report was released. "It will take BP years to clear its reputation," Antoine Leurent of the Paris-based brokerage and consulting firm KBC Peelhunt, and an oil sector Analyst, says, "but that won't stop investors from buying BP shares."

No investment house has reduced the ratings of BP shares in the last days either. BP's problems during 2006 had already caused a continuous slide in share value, so at this point they're a relative bargain, Hannes Loacker, an oil analyst at the Raiffeisen Zentralbank notes. "The shares could have upside potential if BP gets its problems under control."

So far, BP has not had to feel any economic consequences from the affair. That could soon change. Industry insiders suspect the Russian government might use the scandal as an excuse to flex their muscles against BP. BP works with TNK in the largest cooperative venture with the Western oil industry: TNK-BP. That there may be something to the speculation was shown by the example that was made of rival Shell. It had to relinquish control over its billion-dollar oil and gas project on Sakhalin, a Russian island in the Pacific, to Gasprom, the state monopoly.  Beforehand, the Russian government had threatened to close the Shell operation down - with the argument that Shell's project was violating Russian environmental laws.

- Titus Kroder and Michael Gassmann are correspondents of Financial Times Deutschland in, respectively, London and New York. Olaf Preuss and Claus Hecking are members of the economics editorial team in Hamburg. This article originally appeared on Jan. 19 in Financial Times Deutschland.