BP ‘not prepared’ for deep-water spill

BP ‘not prepared’ for deep-water spill
By Ed Crooks in Houston
Copyright The Financial Times Limited 2010
Published: June 2 2010 16:20 | Last updated: June 3 2010 08:55
http://www.ft.com/cms/s/0/e1e0e21c-6e53-11df-ab79-00144feabdc0.html


BP did not have all the equipment needed to stop the leak from its Macondo well in the Gulf of Mexico in the aftermath of the explosion on an oil rig six weeks ago, the UK company’s chief executive admitted.

Speaking to the Financial Times in Houston as engineers worked on their latest bid to trap the escaping oil, Tony Hayward said BP was looking for new ways to manage “low-probability, high-impact” risks such as the Deepwater Horizon oil rig accident.

That bid suffered a temporary setback on Wednesday when a saw was stuck during a risky operation to sever the leaking pipe.

“What is undoubtedly true is that we did not have the tools you would want in your tool-kit,” Mr Hayward said. He accepted it was “an entirely fair criticism” to say the company had not been fully prepared for a deep-water oil leak.

The containment effort on the surface, he said, had been “very successful” in keeping oil away from the coast. “Considering how big this has been, very little has got away from us,” Mr Hayward said. But in trying to plug the leak, BP had been reaching for many of the same techniques used to control the Ixtoc 1 blow-out in the Gulf of Mexico 31 years ago.

“After the Exxon Valdez spill in 1989, the industry created the Marine Spill Response Corporation to contain oil on the surface... The issue will be to create the same sub-sea response capability,” he explained.

With BP and the rest of the industry threatened with being shut out of the deep waters of the Gulf, the most promising US region for oil development, Mr Hayward argued that reform could justify continued drilling in those challenging areas.

The gas blow-out that caused an explosion on the rig on April 20 that killed 11 men had been a “one in a million” chance, Mr Hayward said, but that risk had to be cut to a “one in a billion or one in a trillion” chance.

Analysts believe the disaster could cost BP $20bn (£13.7bn) in clean-up costs, compensation, damages and fines, and has done incalculable harm to the company’s position in the US.

BP said on Thursday that it had agreed to fund the construction of six sections of a proposed barrier off Louisiana. It will fund the estimated $360m it will cost to construct the six sections.

US officials now say the slick is approaching Florida’s shoreline, with the National Oceanic and Atmospheric Administration projecting that oil could hit the Panhandle within days.

Charlie Crist, governor of Florida, on Wednesday described the slick as “disturbing and disgusting” he added: “I was briefed on Memorial Day [Monday] about the oil being 80 miles offshore and then today I hear it’s seven miles offshore.”

BP believes that on the Deepwater Horizon rig there were seven separate problems that could have contributed to the accident, including failures of the cement in the well, the tests run on the well, and the blow-out preventer, intended to stop releases of oil and gas.

Those failures could have involved a number of different companies besides BP, including Transocean, which owned and operated the rig, Halliburton, which cemented the well, and Cameron International, which made the blow-out preventer.

BP was in overall control, but responsibility for safety was shared. That model may have to change, said Mr Hayward.

Political pressure on BP from Washington increased further, with two senior senators, Charles Schumer and Ron Wyd, calling on the company to suspend any plans to pay dividends. In a letter to Mr Hayward, the senators wrote that it would be “unfathomable” for BP to pay a dividend to shareholders before the total cost of BP’s oil spill clean-up was calculated.

Shares in BP, which have fallen sharply since the spill, gained 2.2 per cent to 439.1p in early London trading on Thursday.