Big oil spill may not just be BP’s problem
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.