Book Review: BP and the world's biggest oil spill
BP, one of the world's largest integrated energy companies, was cleared June 15 to buy 30 percent of Reliance Industries' oil and gas blocks for $7.2 billion. Across Asia, BP has exploration and production facilities in China, Indonesia, Vietnam and Pakistan. It manufactures chemicals in China, South Korea and Malaysia. It leads in the production of liquefied natural gas in China through joint ventures. It manufactures solar panels in India and markets lubricants and oil products throughout the region, with major retail operations in India and China.
Given the breadth and depth of BP's Asian operations, Asia collectively ought to pay attention to what happened on April 20, 2010, when the Deepwater Horizon blew up in the Gulf of Mexico, killing 11 men working on the platform and injuring 17 others. The Macondo Prospect well that the Deepwater Horizon was drilling would pour an average estimated 53,000 barrels of crude per day into the Gulf, ultimately spilling about 4.9 million barrels before the well was finally capped three months later, on July 15. It was the world's biggest oil spill ever.
The story of BP's disaster is told by Stanley Reed, the London bureau chief of Business Week, now owned by Bloomberg, and Allison Fitzgerald, a Bloomberg investigative reporter, in a book appropriately titled In Too Deep: BP and the Drilling Race that Took it Down, because it points out that although the Deepwater Horizon was the worst of BP's environmental disasters, it wasn't the first, and it appears to have stemmed from a culture that demanded far too many shortcuts in the race to capture a significant percentage of the world's fossil fuels, in ever-deeper water.
"The story behind the Macondo blowout is more than a story about technical failures or human error," the two write. "The root cause, we found, may lie in BP's particular corporate culture, which depends on and even celebrates risk-taking. The company's corporate DNA is different from its competitors, where engineering principles dominate. BP is more of a financial culture. BP is very creative at finding oil and persuading governments to open their doors. Bt is sometimes less good at everyday operations."
Indeed. As John Browne, later to become Lord Browne, sought to transform BP into a profit machine, maintenance of the company's far-flung operations suffered so badly that when other companies took over BP leases, they found maintenance to be so poor that they were alarmed, the authors write. As early as 2000, it was facing problems in the company's operations in Scotland. Browne was CEO from 1995 to 2007. An explosion at BP's massive Texas City refinery on March 23, 2005, took the lives of 16 workers. Shoddy maintenance after BP took over the oil pipelines at Prudhoe Bay resulted in two major oil spills.
"Because of Texas City and Alaska," the authors write, "and a series of smaller infractions, congressional investigators, the Labor Department and the Justice Department have constantly monitored BP refineries and pipelines. The company paid a US$50 million criminal fine for the Texas City disaster, and another US$12 million for Alaska. It remained on criminal probation when the Deepwater Horizon exploded. OSHA (The US Occupational Safety and Health Administration) in June 2010 fined the company another US$50 million for failing to fix the problems at Texas City, one of the conditions of its probation."
BP's safety violations, the authors write, far outstrip any of those recorded by its rivals and several industry officials and investigators say the company's record can't be justified by its size. They point to Exxon Mobil, the poster child for previous environmental irresponsibility when the Exxon Valdez supertanker went ashore in Prince William Sound In Alaska, spilling somewhere between 260,000 and 750,000 barrels of crude into Alaska's pristine waters in what was then termed one of the most devastating human-caused environmental disasters ever.
When Lord Browne turned operations over to the luckless Tony Hayward in 2007, Hayward set out to correct the institutional problems that Brown had bequeathed to him. He didn't have a lot of success. In From June 2007 to February 2010 – even before the Deepwater Horizon blew up – OSHA had fined BP for 760 "serious and willful" violations of worker safety. The next worst offender in the oil industry, the authors write, was Sunoco, which had just eight during the same period.
In January 2010, congressional investigators detailed five events over the previous 18 months detailing continuing maintenance problems including an explosion that sent 14 and 28-foot lengths of pipe flying through the air to land 900 feet away. Two BP contract workers on the North Slope were crushed to death by their own vehicles.
During the three months in which crude flowed unchecked into the gulf, ruining the shrimping industry, oiling hundreds of miles of what has been called the Redneck Riviera and delivering up a massive political crisis for US President Barack Obama, Hayward would eventually become the congress's favorite punching bag before being ousted in favor of Robert Dudley, a traditional Texas oilman who is now running what used to be a quintessential British company.
The Exxon Valdez spill was dwarfed by the Deepwater Horizon disaster by a factor of nearly 100. But, the authors write, the Alaskan disaster initiated a dramatic change in the way Exxon Mobil approached its drilling and exploration methods. The US energy giant, now gun-shy, has regularly walked away from unpredictable or unstable sites rather than dare another environmental catastrophe.
It remains to be seen if BP, whose roots go back 100 years when it was founded as the Anglo-Persian Oil Co., and which in its heyday was powerful enough to get the British and American governments to bring down regimes that got in its way, will change its culture as Exxon Mobil has done. Out of the purview of prying western eyes – the hot glare of television cameras in the Gulf, Texas and the North Slope – oil companies can get up to considerable mischief. The oil majors' activities in Nigeria, for instance, have been called an even bigger disaster than Deepwater Horizon. The oil industry's activities across the globe are responsible for huge environmental disasters. What they are up to in some Asian countries remains to be seen.
In Deep Water is a valuable record of BP's disastrous stewardship. But it has to be said that the book is also a frustrating read that required serious editing. Far too often the authors double back on themselves, inserting unrelated passages of history here and there that break up the flow of the narrative. Passages are repeated verbatim, as if the authors were cutting and pasting lots of material and sometimes repeating stuff. The book, published by the Bloomberg Press, appears to be a new entry by Bloomberg into a game previously dominated by Wall Street Journal reporters who were better organized, or perhaps better edited. If it goes into a second edition, one hopes the mistakes will be cleaned up.