Lets summarize beyond the technical details.
The US tops the bill in energy consumption per capita and it’s commitment to oil exploration in every available corner should therefor come as no surprise. What’s been overlooked or mostly ignored until now are the associated risks. Alaska was as close as it got but thats not exactly the average Joe’s backyard so who cares. Thats was until now. All of a sudden oil addiction has a price-tag and the present situation in the GOM makes it all too clear.
Who knows what will happen in the (near) future on US, Brazilian, Continental Europe, African or Far East coasts. This won’t be the last incident but more importantly it won’t be the end of the world either. So let’s have a look what can be done to minimize any possible future accidents. My personal future scenario looks like this:
The oil industry has a huge task ahead and after this incident they all know it. Standard practice will be reviewed, new and better technology developed, safety first will go up a notch or two. Then its back to business as usual. BP will evolve as a company that has changed it attitude because no one will allow them the slack that they have indulged from during the past.
Government should scrutinize its existing rules and regulations with regards to putting effective oversight in place. A new MMS sufficiently funded (so that they can afford top notch specialists) should be able to exercise enough power and expertise to enforce and if need be talk shop by immediately blocking risky or non compliant behavior.
As we have learned by know in emergency cases, sufficient clean-up equipment should be available on short notice. Every drilling operation should have immediate access to this pool of equipment and pay its fair share on mandatory standby fees. This would require new legislation, and lets all hope that it can be achieved regardless of undoubtedly fierce opposition.
Again legislation. Money is what counts in this industry so make accidental spills or any other form of accident expensive as hell. Management will start calculating before making any risky decisions, you can rest assure, thereby curbing the oil industry into a new form of mindset and operating procedures.
Attitude. A good example for this kind of procedure applies to the prevailing faith in oil industry technology. Don’t! There is no such thing as 100% safe technology. A BOP is a form of last resort that should be avoided at all cost. Designed as a failsafe device it can and evidently will fail if circumstances permit it. So again DON’T rely on technology as the answer to all problems. Instead start working safe all through the organization. This fundamental change will have to take place in the minds of everybody involved. It’s basically an attitude problem that works both ways, ground up and top down, and it will take time.
Now for BP. I guess they are between these scenarios. They started the top down process apparently when Tony Hayward took over. Personally I think that his devastation is not just a show, nor his commitment to safety. The point is you can’t turn a global company with 100.000 employees 180 around in 3 years time. And even if you were able to do so there’s a bunch of shareholders you have to convince also. 3 years? It’s just not possible.
BTW to anyone that holds an understandable grudge against Mr. Hayward or BP in general I would recommend studying the way Union Carbide handled the BOPAL accident as an example of corporate behavior. By comparison BP looks like another fine example of corporate greed albeit rather bleak.
So what can, and what should BP be doing in the next couple of months? First of all stay focused, second stay open and lastly try to minimize consequences for anyone/anything involved. And thats exactly what it’s CEO was preaching during the congressional hearing all day long.
Let me explain that a bit more in detail.
Remember he is the CEO of a HUGE corporation an as thus he can’t have detailed knowledge of every operational aspect. His job is to provide guidelines and delegate every aspect of this policy. Secondly he has to make sure that everybody performs according to these guidelines and apparently that still isn’t the case. Thats behind his first mantra stay focused.
Any axing or blame-games at this stage will be counter productive in many respects. Shareholder driven enterprises can’t afford this kind of financial risk in general and the oil industry is no exception. To anyone who even remotely thinks that axing BP would be a good idea I can only say ‘don’t even think about it’ The intricacies of corporate business are firmly in place with a multi like BP and you can rest assure that they will survive on the expense of the American tax-payer if push comes to shove. BP US will file for chapter eleven and BP global will commence business as usual. So don’t! A good way to avoid this from BP’s points of view is to stay open.
His last mantra (putting things right) is solidified with an absolutely unprecedented $ 20 Billion escrow account. So yes I think BP is on the right track.
Now what did congress expect in it’s hearing? BP pleading guilty on all accounts? Get a life. It doesn’t work that way, neither in the US nor any other place worldwide. Too many vested interests on both sides. Any tough conclusions about cause and who is to blame? No sir not in this stage.
Yes, the CEO knows what happened on board the DWH and HQ back on land. He knew that within 48 hours max. But the puzzle is still missing a major part, and thats attached to the riser 4900 ft. below sea level. As soon as BP has the chance to recover the BOP from the sea floor the investigation will commence and conclusions can be drawn. This accident is a combination of decisions and mechanical failures not unlike an airplane with engine failure, falling from the sky. To put this in perspective: since when has the NTSB been able to provide a detailed conclusion within 2 months while important evidence, the engine or in this case the BOP, is still missing?
So what was this hearing from congress all about? To be frank in my opinion it was a show to convince to American public that politics is acting tough. Asking questions about cement jobs, liners, BOP’s and any other technical detail is ridiculous. Do they honestly believe that the CEO personally supervises every operational decision and intervenes if necessary based on personal technical know how? Leave it to the experts, period! BP will reach their own conclusion in due time and the CEO has personally stated that the results will be presented no holds barred. He certainly didn’t come voluntary to plead guilty on all charges. So lets just say that his answers or lack of should suffice for now.
On the other hand of what we saw was anger and frustration that culminated during this hearing and its understandable. The associated expectation to get conclusive answers at this stage was as ignorant as it was down right naive. The only benefit to be had was free publicity for all candidates and a shameful display of mutual helplessness. BP stumbled into another PR disaster and as a consequence Tony Hayward has been relieved of his job. You could call it collateral damage I guess, but is won’t change a thing on the outcome of this event.
Now this may all sound like I think that BP is innocent so let me summarize Thursdays most important question: Has BP cut any corners and let costs prevail over safety?
Yes they have, but as long as the complete picture is missing it’s too early to tell no matter how much speculation and hear-say are tied in together. It’s the way these investigations work. I am quit confident that 3 individual investigations will leave no stone unturned but they all need time. The moment to put the blame on somebody /something will come.
The only preliminary conclusion that can be drawn at this stage is that the oil industry as a whole will be undergoing a fundamental change that forces them to reconsider their business practice. Nobody in his right mind will ever undertake this kind of risky behavior again. These changes will go a long way from absolutely ground floor to CEO and shareholders alike and can be summarized in one single phrase ‘remember DWH?’ The key to these changes is the money involved and governments doing their job in establishing new regulations and oversight.
On a side note: I don’t think that Tony Hayward’s decision to establish the famous relief fund was cleared with BP’s executive board. Impossible you think? You would be surprised. He has however by doing so created a precedent that will echo for decades to come and for that, strange at I may seem, we should be grateful. Combined however with his catastrophic appearance before ‘court’ his ousting was inevitable. Now let’s see how BP will handle this crisis in the near future.