BP’s PR sludge keeps flowing with new book

November 23, 2010

BP may have felt the public relations tide was turning in its favor. Probes into its Gulf of Mexico spill have so far unearthed no direct proof that a culture of corner-cutting at BP caused the disaster and investigators have even spread part of the blame to the firm’s contractors. But the reprieve may be cut short by writer Loren Steffy’s deeply critical history: “Drowning in Oil: BP and the Reckless Pursuit of Profit.”

Like the financial crisis, BP’s record-breaking oil spill is sure to spawn a shelf full of books. Steffy’s readable account has surfaced before the release of much important evidence relating to BP’s greatest mishap. Still, the author makes a convincing case that the Macondo blunder can be traced to a longstanding BP culture of neglecting safety.

For the American public, Tony Hayward will forever be the public face of the spill. And the displaced BP chief does not escape criticism in Steffy’s account. But it is Hayward’s predecessor John Browne who emerges as the true source of BP’s serial lapses. When Browne took the helm at BP in 1995 the once grand company had become the “stepchild” of the “Seven Sisters,” as the world’s largest integrated oil companies were known.

Through a spree of takeovers—including Amoco and Arco—Browne succeeded in catapulting BP up the ranks of major oil producers. Yet rather than adopt the safety-first culture of Arco, Browne launched a “relentless” war on costs. Popular as this was with shareholders, it stored up future problems. By the time of the 2005 Texas City refinery explosion—which killed 15—”Browne’s cobbled together business empire was warping and buckling like a cheap coffee table left in the rain,” Steffy argues.

Penny-pinching, he contends, was at the root of each of BP’s high-profile accidents. Just a year before the Texas City accident, London headquarters had ordered refineries to cut costs by a quarter. Displaying a “pugilistic attitude” to expenses, Browne shunted much of the refinery staff off the company’s payroll and neglected training and repairs. Investigations into the blast revealed that BP managers had known a key piece of safety equipment wasn’t working and yet had put off repairs. This cavalier approach to safety was mirrored in BP’s pipeline and exploration operations, Steffy argues. After BP’s Prudhoe Bay oil spill in 2006—the largest on Alaska’s North Slope to date—it was revealed that 16 miles of pipes had corroded and posed a serious threat of leaking.

Despite this evidence, Browne and his managers refused to acknowledge the possibility that cost cuts played a role in either incident. Indeed, in an internal report after the Texas City disaster BP pointed the finger at bumbling workers rather than poorly maintained equipment. Echoes of this blame-shifting can also be found in BP’s response to the Macondo spill.

A stubborn unwillingness to link costs and safety was also Hayward’s great failure, Steffy suggests. The new chief initially made good on his promises to focus “like a laser” on preventing accidents, hiring 1,000 new engineers and investing $1 billion in the Texas City refinery. Yet he still clung to the mantra that budget cuts did not contribute to BP’s refinery explosion or the Alaska spill. And as oil prices plunged in 2009, Hayward too slashed $4 billion in expenses.

As far as Steffy is concerned, the Macondo spill was merely the latest in a long line of related blunders. The bargain-price well design, the failure to conduct key tests and the undue haste with which engineers rushed toward completing the well, were all hallmarks of BP’s lackadaisical approach to safety.

Of course, weak regulation played a vital supporting role. Steffy portrays the now defunct Minerals Management Service, which oversaw the oil industry, as understaffed and venal. Just over 50 inspectors, many lacking training and experience, supervised 3,000 offshore facilities in the Gulf of Mexico—compared to 5 inspectors for 23 rigs on the West Coast. Even this skeleton crew saw their role as enabling, rather than restricting, the industry. The quest to reduce dependence on foreign oil and maximize royalty payments took precedence over public safety, Steffy argues. If that weren’t enough MMS employees were showered with goodies from oil company executives that stopped only slightly short of bribery.

Still this is mainly a book about Lord Browne’s toxic legacy. As a result, it is hard not to see the ascent of Bob Dudley—who like Hayward was part of Browne’s inner circle—as a bad omen. Dudley may yet break the mold. But Steffy ends his book with an ominous quote from the new chief. When asked whether his new safety initiatives were an admission of past mistakes, Dudley declared, “I wouldn’t describe it as an admission of anything.”

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BP is an example of the failure of ‘global trade’. The company needs to be driven from American shores forever. Foreign ownership of American real estate is wrong as is allowing any foreign company to extract American natural resources.

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