Cap marks only end of beginning for BP crisis
BP’s Gulf of Mexico oil disaster knocked Goldman Sachs off the front pages. It’s just the UK oil major’s luck that its best news in 86 days was overshadowed by Goldman’s settlement with the U.S. Securities and Exchange Commission. Few will praise BP’s speed, but its initial complete capping of the well is a big step forward. Restoring credibility and relations with Uncle Sam will, however, take years.
It could still go wrong again. But if the seemingly successful test on Thursday turns into part of a longer-term solution to the leak, it will mark the end of a period that has been torture for BP — but only the beginning of a healing process for the company and its bruised shareholders. For the first time since April, there won’t be live pictures of its oil gushing into U.S. waters. And the company’s bill will no longer be ticking higher by the barrel. All being well, BP will get a breather from bad publicity while it works on the permanent answer — its relief wells.
The company will still face serious problems. The success of the latest cap will raise the question of why it wasn’t available earlier, adding to the impression that BP was hopelessly ill-prepared for an accident. And even if not another drop leaks into the sea, BP’s financial hangover will be monumental. Based on reasonable assumptions, the total bill for clean-up and damages could approach $40 billion, though some costs may be tax-deductible. And before long, investors will be clamoring to see a plan for the restoration of the company’s once gold-plated dividend.
Rebuilding any kind of trust with U.S. authorities is also likely to require diplomatic skills far beyond those of Tony Hayward, the damaged BP chief executive who charmed few Americans, and the frequently invisible chairman, Carl-Henric Svanberg. Some lawmakers are working on legislation seemingly tailored specifically to exclude BP from future U.S. projects. With almost half of its pre-crisis value hinging on its U.S. businesses, BP can ill afford to be left out in the cold.
So while a sigh of relief may be in order, there’s still much hard work to be done. BP has dismissed all talk of corporate change, saying it is single-mindedly focused on capping the well. It no longer has that excuse. Management change is now top of the agenda.