The Armani-style beige suits worn by security staff at BP headquarters in London and introduced under the reign of former boss, Lord (John) Browne, are to be quietly dropped in favour of more traditional grey ones. It is a small change but one dripping with symbolism that the flamboyant days of the "sun king" are definitely over and the company is going back to basics and a bit of no-nonsense austerity.

New chief executive, Tony Hayward, has embarked on a cost-cutting programme that will see the removal of 14,500 jobs and slice £500m off the company's overheads as part of a wider plan to streamline the business.

The biggest change at the oil major is associated with none of these initiatives: it is the decision to accept that high crude prices of between $60 and $90 per barrel are here to stay, which will affect the whole strategy of BP. This "seismic shift," as one veteran analyst described it, promises to hasten in an era of higher dividends, more capital expenditure and investments in high-cost areas such as the oil sands of Canada that were previously considered too costly - and environmentally unfriendly.

'Climate crime'

BP appears to be dropping a central plank of Browne's strategy, the green promise to go "beyond petroleum", in favour of going back to petroleum - a move which many believe has riled the former boss. In what some saw as a thinly veiled criticism, Browne argued at a recent conference that some energy groups were "in denial" over the need to clean up their carbon output.

The move into tar sands through a deal with Husky Energy has been condemned by Greenpeace as "a climate crime" because three times as much carbon is produced extracting the crude from the ground compared with ordinary oil operations. Steam or hot water is used to separate the oil from the sand and then more power must be used to turn it into useable fuel. Hayward has also upset green groups by downgrading the company's alternative energy portfolio and dropping plans for an innovative carbon capture and storage (CCS) experiment at Peterhead, Scotland.

The former head of exploration and production makes clear that now every-

thing, including renewable fuels, must pay their way, at a time when BP is under pressure to restore its financial standing. The firm was once the biggest company on the UK stockmarket, but a reversal of fortunes has left it vulnerable to acquisition. Despite four years of increasing crude prices, BP has contrived to destroy its advantages through of a series of accidents, notably the Texas City refinery fire and Alaskan pipeline spills, while being hit by a number of trading scandals. Browne was forced to leave the group in April after lying in the high court over his personal life.

Hayward may have been tanned and relaxed at the recent annual financial results announcement after his holiday in the British Virgin Islands, but he was desperate to declare he felt anything but complacent. "The year 2007 was one of change for BP. In terms of financial performance it was one which most of us will be glad to leave behind. We are judged by investors in relation to our peers. In that regard our financial performance was not good enough," he said candidly.

The company had just reported a 22% fall in annual profits to $17.3bn at a time of record oil prices, so there was little place to hide, except in the knowledge that the problems had started and gathered pace during the reign of his predecessor. By far the biggest hole in the accounts came from the low throughput performance of the Texas City and Whiting refineries, assets acquired by Browne during a spending spree, after being hit by a mixture of explosion, hurricanes and repair problems which cut output in half at peak times.

Carbon billionaires

Hayward appears to be doing all he can to distance himself from the man who had appointed him head of exploration and once saw him as a successor.

While he is instilling a new commercial discipline into BP's alternative energy portfolio, which takes in small wind farms, CCS experiments in California and hydrogen fuel research, Hayward is as keen as ever to ensure the company's greener image remains.

But the environmental groups do not believe him. James Marriott, of campaigning group Platform, said: "Moving into the tar sands of Canada and dropping a carbon capture and storage plan for Peterhead are part of a recarbonisation of BP. It might help the share price in the short term but longer term Hayward is exposing the company to the dangers of a rising carbon price [for CO2 emissions permits] and falling oil price."

There have also been rumblings that some BP staffers are unhappy. A senior manager who left in December has questioned the wider strategy of the oil industry in searching for ever more reserves at a time when the world is trying to reduce its carbon output. Jan-Peter Onstwedder, formerly BP's most senior risk manager, calculates potential carbon emissions from proven oil, gas and coal reserves at 700bn tonnes, compared with about 500bn tonnes which can be emitted this century and keep temperature increases within less dangerous bounds. "It prompts the questions: where does more exploration fit, do we already have all the reserves we possibly need? I don't know whether they [the oil industry] thought their strategy through."

Browne has kept a low profile since he left the company, but at a recent speech to the World Future Energy Summit in Abu Dhabi, he let fly, saying there was a need to "displace high-carbon options" in the choices that were made in future.

Browne said the way energy companies approached carbon in future would be a core issue for investors and it was only a matter of time before the world would see several carbon billionaires while renewable power "majors" would make it into the Fortune 500.

"Carbon is coming and it will impose costs on conventional energy sources. Energy businesses should not live in a state of denial, but work constructively with governments to ensure a smooth transition," he said at the summit.

"The challenge is to reduce emissions against business-as-usual projections, which does not necessarily mean revolutionising existing energy infrastructure. The key is to displace high-carbon options with low-carbon options in the choices we make from now onwards about new energy capacity," he added.

It is unclear what Browne will make of the end of the beige suits, but he certainly does not sound ready to endorse the black oil sands.