"What the hell did we do to deserve this?"
You can imagine the shock and indignation in his voice. How could this have happened to BP, the darlings of the business world, whose streamlined management structure was the stuff of Business Seminars the world over?
What's more, they were the nice ones, the ones with big green flower as a logo, the ones who cared about the environment.
How could it happen to them?
Here's how.
Greenwash
In 1997 John Browne, the dapper CEO of British Petroleum, as it then was, made a speech at Stanford University in which he acknowledged that Climate Change "cannot be discounted".Today you'd expect him to go on to suggest that the Pope may very well be Catholic and that bears use the trees for their ablutions, but in 1997 this was big news coming from an oil man.
In the rush to crown Browne as the new Sun King most people ignored the fact he went on to say that "dramatic, sudden" action that "sought, at a stroke, drastically to restrict carbon emissions" would be "wrong".
For many, it was enough that he had even mentioned Global Warming.
Browne knew what he was doing making that speech, or at least he thought he did. If governments wanted to do something about Climate Change the easiest and simplest thing was to phase out coal fired power stations and replace them with gas. And where would they get their gas from? BP of course.
However, even whilst Browne was making this speech, BP was employing British spy agency Hakluyt, and their German agent Manfred Schlickenrieder, to infiltrate Greenpeace in order to disrupt their campaign against BP's deep water drilling in the Atlantic. I was part of that campaign and wondered why BP were always one step ahead of us. We thought MI5 were hacking our emails. They probably were, but it was Schlickenrieder that was tipping off BP.
That Greenpeace saw through the greenwash didn't bother Browne. Some cynics suggested that calling yourself Beyond Petroleum when your main business was oil was a bit confusing. Others thought that Browne was just storing up trouble for the future, and that the clean and green image would rear up an bite BP on the bum if anything went wrong. But Browne just ignored them and lapped up the accolades.
Rogue Traders
BP was an oil company with very little oil, so he went to look for some. More to the point he would regularly announce he had found it when he hadn't. The imaginary oil ended up costing them money, but in the short term BP's share price went up. That was not wise in the long term, but at least it was legal. However a lot of what BP's oil trading unit got up to under Browne was neither wise nor legal.
As both a producer and trader in oil BP had always had the chance to manipulate the market via what's known in the business as a 'squeeze', where a company would hold oil back in order to raise the price before selling.
However the world of derivatives opened up the opportunity for a reverse squeeze. Rather than using real oil to manipulate the virtual market, the oil traders would buy up oil derivatives in order to raise the price of the real crude.
This was sharp practice, and led to the company being repeatedly fined by US authorities. But that didn't bother BP, for as long as it's oil trading division brought in cash, the City was happy.
Spills
Whole tiers of management were replaced, and complex indices of performance were replace by just one tally of a manager's success; cost. The manager who cut his budget got promoted. The manager who spent more went down. Managers moved rapidly around the company, so there was no point making savings tomorrow, costs had to be cut today. This short term thinking had a disastrous effect on BP's infrastructure, especially in it's controversial operations in Alaska.
Maintaining the safety of an oil pipeline isn't rocket science. You just need to clean the rust off and keep an eye on the joints. However such routine maintenance costs money and is easily postponed.
That's what happened in Prudhoe Bay. Costs were driven down, maintenance budgets slashed and pipelines and valves rusted in the Arctic winter. People knew what needed to be done, but BPs structure and pursuit of short term profits at all costs meant managers could only fix problems like Prudhoe Bay at the expenses of their careers.
In March 2006 chickens finally came home to roost for BP as corrosion caused a five day oil leak that spilled over 200,000 gallons of oil onto the ice. The spill ended up costing BP over $100 million in fines and lawsuits and they also had to fix their leaking pipes, which cost them far more than if they'd just maintained them in the first place.But if BP wasn't too bothered about oil spills, there was another type of leak they really didn't like. As the cuts started to bite disgruntled employees had been contacting former oil trader Chuck Hamel, who passed their information on to the media or environmental groups.
BP hated this. They hired private investigators to tap Hamel's phones, intercept his post, steal his rubbish and sift through his credit card records. Slightly more bizarrely women were recruited to try to lure him into a honey trap. When the story eventually broke it caused a storm, and a judge accused the consortium running the pipeline for BP of behaving like "Nazi Germany".
Meanwhile Greenpeace's campaign against BP was again being thwarted, this time by the FBI. This being the window between the end of the Cold War and the beginning of the War on Terror, the Feds were evidently short on suspects and decided Greenpeace were a "domestic terrorist group".
Political Influence
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| Blair, Schwarzenegger and Browne |
Browne's chief adviser, Nick Butler, was a former Labour insider and parliamentary candidate, and his head of communications was was Anji Hunter, Blair's former chief of staff. Meanwhile former BP CEO David Simon became Blair's Minister for European Trade and Competitiveness.
When Libya offered to give up its nuclear program in exchange for being allowed back into the human race, MI6 spook Mark Allen led the negotiations. Shortly afterwards he was working for BP, negotiating an oil deal with Gaddafi. When Libya said that the continued detention of Lockerbie bomber Basset al-Megrahi, and plans to prosecute the murderer of PC Yvonne Fletcher, were problems the message was passed on. Al-Megrahi was released, and leads to who killed the police woman were not followed up.
When there were calls for Britain to follow the USA in suing Libya for the deaths and injuries caused by the explosives they'd given to terrorists, including the Provisional IRA, the government initially refused, before being forced into a U turn by an outraged public.
Unsafe Practices
Political influence clearly helped BP enourously, but it couldn't keep away the grim reality that if you neglected basic maintenance in a dangerous industry like oil it would have a disastrous effect.BP claimed it took safety seriously, and produced graphs to prove it. However the measure they used was personal safety, counting how many workers had had slips, trips and other minor accidents. All this could measure was how dozzy the staff were. However it probably didn't even do that, as the worker who scolded himself on his coffee, or sprained an ankle by not using the hand rail on the stairs, could easily be persuaded to keep quiet if to speak out might affect their job.
But such spin could not hide the reality of dangerously neglected facilities and demoralized and overworked staff.
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| Grangemouth refinery |
In 2002 the authorities in California became suspicious that the Carson plant reporting a decrease in safety violations despite no repairs actually being carried out. Inspectors were refused entry on a variety of grounds, but when they eventually returned with the Sheriff they found that 80% of the tanks breached regulations and that BP had been lying.
BP' reaction to these events was telling. Paul Maslin in Grangemouth, who had repeatedly asked for money to repair his facility, was demoted whilst Colin Reid in California was promoted despite his false reporting.
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| Texas City refinery |
In 2002 John Mazoni, Head of Refining and Marketing warned in a report that there were 'serious concerns about potential for a major site incident ' at the Texas City refinery. He was ignored.
Instead a program of vigorous cost cutting continued at the plant. A former executive Vice President later said 'the guys who ran the refinery. they were afraid for their jobs, there was a culture of fear'.
It could only end one way.
On 23 March 2005 workers repairing a raffinate splitter gasoline unit overfilled the unit. The level indicator and alarm were not working properly, and hydrocarbons overflowed into the blowback stack. This was an old model, no longer used by other companies, and there was a known risk of hydrocarbons leaking if this happened. In the control room staff, working 12 hour shifts due to shortages, failed to notice and the alarm was broken.
Fifteen people died and 170 were hospitalised, with injuries including 90% burns and lost limbs.
Dodging Responsibility
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| Ewa Rowe c. Jeff Wilson |
However behind the scenes they were doing exactly the opposite to what they said. Helped by a US press that seemed more interested in trying to blame Al Qaeda, BP nearly got away with it. The six hard hats that overfilled the unit were held solely responsible for the accident and sacked. The publicity budget was doubled and publications which carried lucrative BP advertising were warned not to write negative stories. One PR expert said "They handled the catastrophe like a class act".
Unfortunately for them Eva Rowe, the daughter of Linda and James Rowe, who both blown to pieces by the blast, had a surprise for them. In the small print of her settlement with the company was the clause that they had to release internal documents. These showed how that not only did BP know of the risk of an imminent disaster at the Texas City plant, but that they actually calculated that it would be more cost effective to pay off the victims than to make the repairs that would have saved lives.
Riding Their Luck
This though was an extremely lucky break for BP as during the repairs it was found a critical underwater pipe had been badly welded and had cracked. Had this not been spotted “It could have been catastrophic,” said Gordon A. Aaker Jr., a senior engineering consultant on the project. “You would have lost a lot of oil a mile down before you would have even known. It could have been a helluva spill".
Smart people, and smart organisations, learn from near misses like this, but BP didn't. Instead they continued to chase quick profits and ride their luck.
Clearly though this wasn't going to last forever.
Meet The New Boss
Shortly afterwards Browne departed the company after lying in court over the relationship with his ex-boyfriend. It's hard not to have a touch of sympathy for him here. He lived with his mother, a survivor of Auschwitz with old fashioned values, and worked in the ultra macho world of oil and big money. Coming out as gay would not have been easy for a man who struggled to relate to real people at the best of times.
His replacement was Tony Haywood. He was a former 'turtle', as they called Browne's globe trotting personal assistants. This was virtually the only way to get to the top of BP under Browne, and the result was a C Team who worshipped the boss and rarely dissented, which is never good management.
Hayward was effectively gifted the job when the Ewa Rowe settlement revealed that his main rival, Mazoni, had sent an email complaining that dealing with the Texas City blast had caused him to lose "a precious day of my leave".
Not surprisingly the accidents continued under Haywood. In 2008 poor cementing of an oil well in Caspian Sea caused a gas leak that could have killed all 200 people on BP's rig. They managed to keep the accident a commercial secret, but were betrayed when in 2010 Wikileaks published the account they'd given to the US Consulate.
Between June 2007 and February 2010 the US Occupational Safety and Health Administration Administration hit BP with 862 citations, not counting the 709 for Texas City. The next worst offender was Sunoco with 127.
And for good measure there were three leaks within a month in Prudhoe Bay.
And for good measure there were three leaks within a month in Prudhoe Bay.
Deepwater Horizon
When it exploded on 20 April 2010, killing eleven crew, plunging another 115 into the sea and causing the worst oil spill in US history, it was merely chickens coming home to roost for BP.
According to the greenwash in their 2009 Sustainability Review BP was working towards its goal of 'no accidents, no harm to people and no damage to the environment', a refrain that was gleefully taken up by American politicians, with even Obama saying in early April 2010 "Oil rigs today generally don't cause spills." The result was one of the laxest regulatory regimes in the world.
Halliburton recommended that BP use 21 centralisers to keep the drill pipe in place. The Deepwater Horizon only had six on board. They could have ordered more but the rig was costing them $1 million a day to hire and Haywood had made a goal of reducing unproductive time.
Next the cementing of the bore was rushed. Doing it properly would have meant paying the Halliburton contractors to stay on. Instead they were sent home without the usual checks being carried out.
Then just like with the Thunder Horse, there was another near miss. On 8 March 2010 a 'kick' occurred when gas entered the well and surged up the pipe. It took the crew a remarkably slow 33 minutes to react. Fortunately the Blowout Preventer worked and saved the rig, but it was a close run thing.
Again though, no lessons were learnt.
Then at 9PM 20 April 2010 the Deepwater Horizon pressure tested the well. It seems the BP
engineers lacked the skills to read the results. BP's monitoring station on land had shut at 5PM, as a cost saving measure, and nobody on board noticed the deadly pressure build up.
The first indication of trouble was when the supply ship Damon B. Bankson noticed drilling mud coming out of the top of the rig. By the time they had radioed the Deepwater Horizon it was too late.
In the aftermath BP set up a website to give information on the disaster, which they gave the title of "Gulf of Mexico - Transocean Drilling Incident."The rig could have been saved at the last minute if the Transocean staff on board had noticed the pressure build up. However this was the only link in the chain that led to the disaster for which BP was not wholly responsible for.
Once the US government became involved the website's name was changed to BP Drilling Incident.
"Life's Not Fair"
BP tried other tricks too.
They claimed the leak was "only" 5000 barrels a day, and managed to get a compliant media to use this figure even when independent scientists were saying it was clearly much more. 62,000 barrels a day is now the best estimate.
Then they tried to blame, and sue, the manufacturer of the Blow Out Preventer. The BOP may have been damaged in 8 March kick, or it may have failed due to the lack of centralisers, but in either case they were never expected to be 100% reliable. This was like than the operator of an unsafe aeroplane blaming a fatal crash on the company that made the escape chutes.
Finally they tried to rally thier friends in the UK, claiming they were the victims of an anti-British witch hunt by the US. The Daily Express wrote that Obama was "anti-British as ever" for no better reason than that his Dad had been tortured by the colonial authorities during the Mau Mau rebellion.
When all that failed they pulled the ever reliable "too big to fail" argument. Haywood and the Chairman of the Board met with President Obama and said that if the US didn't lay off BP there would be no company left and they'd be left sweeping up the oil themselves. This worked.
However it really was all over for Haywood.He left with a years salary, that was £1 million, a pension pot worth £11 million and a seat on the board of a subsidiary worth £150,000 a year.
He considered himself the victim and was reported to have said "Life isn't fair."
I think I actually agree with him there.
References
Spills and Spin: The Inside Story of BP by Tom Bergin
MI6 'Firm' Spied on Green Groups Sunday Times 17 June 2001
A Review of the FBIs Investigations Into Certain Advocacy Groups US Department of Justice
In BP's Record, A History of Boldness and Costly Blunders The New York Times 12 July 2010
BP Sustainability Review 2009
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