Big oil spill may not just be BP’s problem

April 27, 2010

Crisis control is an art, as BP knows all too well. The UK oil and gas major is sparing nothing in dealing with the fatal explosion on a Gulf of Mexico oil rig. Tony Hayward, the chief executive, has deployed 32 ships, two rigs, five airplanes and over 1,000 people. That may seem excessive for a relatively small spill, estimated at 1,000 barrels a day, but too much is better than too little.

Mr. Hayward is clearly worried about BP’s reputation, which had been badly damaged when he took the job three years ago. In both a 2005 explosion in the company’s Texas City refinery and problems in an Alaskan pipeline, BP was directly responsible and partly at fault.

This case looks different: the rig was operated by Swiss contractor Transocean and the problem appears to have been technical, the failure of a key piece of equipment, the blowout preventer. But even if this accident was extremely bad luck – the blowout preventer is supposed to be fool-proof – BP designed the project and is ultimately responsible for the clean-up. That might take months and cost as much as $200 million, including the expense of drilling a relief well. In addition, there could be lawsuits.

Investors seem to see even worse damages. They have wiped more than 6 billion pounds the company’s market capitalization since the spill, despite strong quarterly results. A big worry is that the spill provokes a public backlash on deep sea drilling, which is the new frontier in oil and gas exploration.

It is hard enough to contain an oil spill on land, but it is much harder depths of 5,000 feet. There aren’t any precedents for this kind of spill at those depths. The explosion gives ammunition to anti-oil environmentalists, just when President Barack Obama is considering expanding offshore drilling.

The desire to prevent a political explosion helps explain BP’s aggressive response. Mr. Hayward may have cleaned up company’s deeper problems, but he stills needs maximal damage limitation, for the sake of BP and the whole industry. That requires is a swift clean-up, and no more freak accidents.


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Posted by Thomson Reuters News Pro story – Big oil spill may not just be BP’s problem « Libro de Notas | Report as abusive

It amazes me to see how disjointed the oil industry is when needing to get their message out, whether it’s to explain issues around exploration and production or address catastrophes like the fire and spill in the Gulf of Mexico. They all still communicate like it’s the 1950s and it’s almost always in crisis mode. Maybe some day they’ll learn that by providing facts about E&P and addressing the potential issues, costs, benefits, dangers… they’ll be able to put a better message out about why these events, even though disastrous, are so rare and how they constantly work for a safer working environment and a smaller environmental footprint.

Their lack of understanding when it comes to communications leaves them wide open for criticism at times like these. Why have BP and Transocean not been out front to mobilize employees and volunteers to assist along the coastlines and sensitive environmental areas? Have they held any public meetings in the coastal communities? Yes, they are focusing on trying to stop the flow of oil but they’re big boys and they can do more than one thing at a time, especially when it comes to the environment they want to operate in.

Posted by CAtransplant | Report as abusive

If we are going to explore in water we need to have foolproof methods of controlling mishaps. They are saying this spill is up to 5,000 barrels a day and it could take 90 days to stop the flow! The damage it may cause in environmentally sensitive areas of Louisiana and over to Florida isn’t easily contained or cleaned up!

Posted by waveonshore | Report as abusive

I think they will get the clean up done and minimize damage. I think the fact that it is in a warm water area makes it easier. It takes time to figure out exactly how to fix the problem and clean up is a matter of getting enough equipment there to get it cleaned up.

Posted by fred5407 | Report as abusive

Please also do not forget that a pipeline owned by a BP subsidiary exploded near Bellingham, WA in 1999 and killed 3 people. It could have been even worse than it was. The subsidiary was found at fault. BP appears to have a systemic problem with managing and mitigating risk. This is unacceptable.

Posted by meeps | Report as abusive

Bought some Transocean today for $78.16. This will pass.

Posted by Duken4evr | Report as abusive

human stupidity and arrogance is endless… drill baby drill

Posted by torks | Report as abusive

Today’s article in the Wall Street Journal (4-29-2010) summed up the problem here in the US. Apparently Norway and Brazil require the use of an acoustic switch on the blow out preventer valve in addition to the cable from the control room on the drilling rig. The acoustic switch which can be activated remotely as a back up system to close the valve. It costs about $500,000 which is about 0.10% of the cost of the drilling rig that was lost and about 2 hours worth of clean-up reported to currently be $6,000,000 per day.

My 13 year old grand daughter read the WSJ article and said “It was a poor decision not to have the acoustic switch installed to shut off the blowout valve on the rig”. I wonder why the US Mineral Management engineers could not come to the same conclusion? Could it be the decisions in all US Government Agencies are made by industry lobbyists based on saving a few dollars and are not based on good engineering practices to protect life, property and the environment?

Posted by JWOA | Report as abusive