It’s the reputation, stupid

Roland Schatz

Time is marching on. In just 7 weeks the “Davos of the energy industry” starts in Canada. The top executives of the 3,500 member organisations of the World Energy Council are meeting to discuss the latest technological advances, more equitable distribution concepts and the more efficient development of international energy concepts with governments and researchers the world over. The BP debacle doesn’t fit into this concept at first glance. Contrary to the last meeting in Rome, this year will see the presence of media from all four corners of the globe. They are looking for answers to those questions that representatives of the energy companies would prefer to avoid.

This will not be possible in Montreal. The demise of the Deepwater Horizon drilling platform featured as a prime time daily soap on all continents. Everybody could see on a daily basis that, besides the banking industry, other industries also have the potential to cause damages which individual companies are no longer able to cope with on their own. And the intensity of the reports, not only on the TV news but also on front pages from tabloids to business, resulted in no-one thinking of just BP when hearing mention of the oil crisis. The latest reports on the Chinese producer, CNPC, of the Dalian pollution which, from a German point of view, is just as far away, emphasise the volatility of the matter.

The reputational damage to BP alone is tangible in the now virtually halved share price. The balance sheet however does not justify such a decline: monthly earnings for the British continue to gush in unchanged in the billions. BP could also compensate for the costs of the damages from Deepwater Horizon by selling off smaller drilling rights – the first revenues reported on these days document that the Brits are achieving markedly higher revenues than were booked on the balance sheet. Then why has the value of the company declined to such an extent, and is remaining on the back foot, despite hard figures published in the financial media?

Image or even media relations were “nice-to-haves” for BP. Aside from smart advertising campaigns which required no investments of time from the Board in terms of regular meetings with journalists, the Group was convinced that communication was a tiresome duty which it could carry out on the side. Only the obligatory information on the quarterly figures was given – nothing more. And that, although the company had already been warned after the Alaska pipeline leaks years ago: journalists already then did not allow themselves to be switched on and off like the advertising motif “Beyond Petroleum”. But as the reporters’ interests then turned from Alaska to another catastrophe, the Brits relaxed and stopped communicating – instead of using the break to build a foundation of trust on which a better, more informed exchange with the public could take place in the future.

Withdrawing Tony Hayworth in October also does not remedy the reputational damage. The exit of the global persona non grata does not solve the actual image problem. With its understanding of communication, BP has brought massive damage to US President Barack Obama. His approval ratings in surveys were already so low at the onset of the catastrophe that he appeared like a wounded tiger in the wake of BP’s mismanagement. He had to, and has to, lash out at almost anything and everything that makes him appear incapable of action as the US President. The daily images of dying birds and unemployed crab fishermen on the evening news act like fresh stabs in an already open wound. If BP had compared the image figures of Obama with those of Bush after Katrina they would have acted differently – Obama’s figures in May were already worse than those of his unpopular predecessor after the catastrophe then.

Armed with these data, the Supervisory Board of BP should not have waited for so long to remove “Tiny Tony” (Hayworth’s nickname in the media since May). Particularly since new revelations of a possible involvement of BP in terms of the release of the Libyan Lockerbie Terrorist Abdel Baset al-Megrahi, as well as the comments made by employees of the oil drill on the rather lax dealing with alarm systems, are further flooding the mass media market, and have the potential political dimensions of another hurricane. Even if BP currently represents only a marginal share of the oil business, BP has now become synonymous with the “No, I can’t” of the US President. To believe that he will not react to that is negligent thinking. Already, he is preparing laws which will exclude BP from accessing other US oil fields in the future. Not because BP is “too big to fail” but because politicians, whose market values hinge only on reputation, will not allow any company in the world to interfere with their election prospects.

The competitors would be well advised to not withdraw and rely on catching only a few splashes of oil-mud. In the final analysis, the communications debacle of BP is a last wake-up call for the entire industry. Silence is oil, speaking is gold. Not only with politicians but also with those who vote them into office. And the most efficient way of doing that is via the media. Montreal could be a start.