Deepwater Horizon – Could this be the end of BP?

It’s been almost impossible to ignore the news headlines concerning the ongoing Deepwater Horizon oil spill crisis in the Gulf of Mexico these past few weeks, and the situation seems to be going from bad to worse, with more oil escaping each day. President Barrack Obama has this week addressed the US nation concerning actions plans and responsibilities, held private meetings with BP bosses, and Tony Hayward, CEO of BP was put directly under question and scrutiny this week by members of the US congress, amid claims of negligence and the shortcutting of safety advice and guidelines.

And this is as it should be, and should have been from the very beginning. I have no sympathy whatsoever for this self-serving corporation or its unsympathetic management or even for its shareholders. What we now have is an unprecedented ecological disaster and an even more enormous task faced to clear up this mess, or rather BP has this responsibility. Yet will it be able to cope by itself? I think not, as the situation as proved so far, BP appear almost as incompetent to even realise the enormity of the breach they have caused, and appears to have little or no contingency for tackling this crisis.

Which leads me to believe that oil companies may not yet be ready to commit fully to these types of venture of offshore and deep water drilling?

Stated as “America’s worst environmental crisis” to date, and compared in terms of enormity and importance with the 911 terrorist catastrophe by the president himself, the Deepwater Horizon oil spill is set to benchmark a point in the oil industry history concerning ethical conduct and to question their environmental responsibilities, and may even ultimately affect the entire industry philosophy and strategy towards deep sea drilling.

As for Tony Hayward himself, his poor performance this week in front of the congress committee merely proves his position is now becoming untenable. Both with his previous insensitive comments regarding the enormity of the catastrophe, and with his rather insincere and minimal comments regarding responsibilities at the committee, this only serves to add to his predicament. It may be time for BP to look to make some amends for this poor public image, yet is this what Hayward wants? Does he want to wash his hands of it all now and “get his life back?” No doubt his written contract with BP permits him a nice big slice of pie even when he finally does get the golden boot?

Quote – “In the 59 days since the oil leak in the Gulf of Mexico, Hayward has been transformed into one of the most hated men in the US, and the ferocity of the encounter between him and the House of Representatives committee on energy and commerce was much-anticipated. As one committee member noted: “The anger at BP is at fever pitch. It’s almost palpable.”

Read more here..
http://www.guardian.co.uk/environment/2010/jun/17/bp-oil-spill-tony-hayward-congress

Earlier this week President Obama met with BP chief Carl-Henric Svanberg, and their lengthy meeting resulted in BP’s concession to a $20bn compensation fund for victims of the spill. Yet this is by no means the speculated final bill for compensation payouts, which could end up somewhere in the region of $34bn, and that is assuming that the crisis will be mitigated by the end of August.

Quote – “The payout is only the start of BP’s pain. The White House was insistent that the $20bn (£13.5bn) was not a cap, and the company’s chairman, Carl-Henric Svanberg, announced that BP would not be paying dividends this year. Svanberg’s appearance at the White House was calculated to mollify public anger in America at the chief executive, Tony Hayward, who is due to testify on the spill before Congress tomorrow .

Obama said the $20bn – equivalent to two years of dividends for BP – may not be enough to honour all the economic claims against the company.”

Read more here..
http://www.guardian.co.uk/environment/2010/jun/16/barack-obama-bp-dividends-compensation

Will this be the nail in the coffin for BP? There has been much speculation this week to this effect, as the compensation bill is set to rise still further, and which highlights that either BP has grossly underestimated the tremendous damage and the increasing price of this environmental disaster, or perhaps was maybe looking to see exactly what they could actually get away with? After all we are talking about experts in their industrial field discussing daily and maybe even hourly the consequences of these failures and compensations. I find it difficult to believe that BP had not already forecast such heavy compensation claims and speculated already these calculations for themselves?

One thing is for sure the entire oil industry is taking note of the lessons to be learned from BP’s mistakes, and all of the big oil players will be looking to ensure that the same fate does not befall them; as well it might if shortcuts such as the ones described and highlighted below are not so unusual as we would be lead to believe?

Quote – “But as the size and scope of BP’s liabilities grow with each passing the day, it is now no longer a question of whether BP can or should pay its dividend. It is increasingly whether it can survive.

On Sunday, 54 Democratic senators demanded that BP pay $20bn into a ring-fenced account to make sure it met all its obligations for the clean-up and damages. The figure stunned the company, which backs most analysts’ estimates that these costs are likely to be nearer to $5bn.”

“The thing is, no one – not BP, not the US senators – knows how much this will end up costing the company. The fishing industry in the Gulf brings in $660m revenue each year. This pales into insignificance compared to the $65bn-a-year tourist industry in Florida, which has already been hit as oil pollutes its beaches, leaving them deserted. Tourism and fishing could suffer for years.”

“BP says nothing has changed to justify a $20bn bill, but this is disingenuous. In less than a month, the size of the size has gone from 5,000 barrels per day to between 20,000 and 40,000 barrels. If BP estimated that the clean-up and damages would cost around $5bn, but the size of the spill has at least quadrupled, then the $20bn demanded by the US senators does not look unreasonable.”

Read more here..
http://www.guardian.co.uk/environment/2010/jun/14/bp-survival-fears-oil-spill

And this is amid an increase in BP share price following the meeting! Work it out..I can’t?

Quote –”The City has welcomed BP’s deal with President Obama over the Gulf of Mexico oil slick, sending the company’s shares to the top of the FTSE 100 leaderboard.

BP shares rose 23.5p, or 7%, to 360.6p in early trading, even though it has agreed not to make any dividend payments for the rest of 2010.”

Read more here..
http://www.guardian.co.uk/business/marketforceslive/2010/jun/17/bp-shares-dividend-oil-spill-compensation-fund

“The five accusations levelled at BP by the committee are:

• That it adopted a cheap design for the well, choosing a single casing rather than a more sophisticated design, despite the fact that its own analysis found strongly in favour of the latter. “The decision appears to have been made to save time and reduce costs,” the letter says.

• BP went with the cheapest option of using just six “centralisers”, which hold the casing in the centre of the borehole, despite being advised by its contractors Halliburton to use 21. Halliburton warned that the well had a “SEVERE gas flow problem” and that using six centralisers would risk the success of the procedure.

• BP decided not to carry out an acoustic test designed to measure the efficacy of the cementing of the well to block off gas flows. The test would have cost $128,000 and taken an extra 12 hours. An independent engineer who gave evidence to the committee said it was “unheard of” not to perform the test and slammed the decision as being “horribly negligent”.

• BP failed to check the proper workings of the new well system by circulating drilling mud from its bottom to the surface. Halliburton suggested the lack of a full test was due to BP’s desire for speed.

• The firm did not install a critical piece of equipment that locks the wellhead and the casing at the level of the sea floor. The absence of the “lockdown sleeve” has been identified as one possible cause of the explosion.”

Read more here..
http://www.guardian.co.uk/environment/2010/jun/14/barack-obama-oil-spill-speech

Should we let BP go under? Quite frankly who cares? Not me the least. The way I see it is BP are a private company that took unqualified risks with the environment, and must pay to correct these mistakes and clean up. And even when they have cleaned up their act, this in no way excuses their responsibilities for these gross lapses in judgment for the sake of pursuing increased revenues and profit.

We all too readily accept these lame excuses and this high-handed indifference by modern corporate and governmental bodies, with their philosophy and culture whereby any mistake, no matter how great the consequences, can be diffused by simple apology and idle promises that it won’t happen again. This is no longer acceptable!

There are lessons to be learnt here by all parties, and lesson #1 is – do not trust the future of our ecosystem with corporations and profit mongers.

This environmental disaster should serve as a warning to us all that the use of Carbon fossil fuels is unsustainable and that where our oceans are concerned this is becoming more hazardous the deeper we go. Should we be drilling the ocean floors to sustain our reliance upon fossil fuels at all or should we be focusing our attentions on renewable energy sources?

Despite the rhetoric of our governments and of the G20 nations towards the aims and goals of reductions in Carbon emissions and of fossil fuel usage, it appears as there is still no firm commitment and fundamentally agreed political philosophy guided towards these reductions.

Are our governments really serious about renewable energy sources or not?

Are we living under the pretence that money and profit are not driving market forces in our pursuit of more and more reliance upon Carbon fossil fuels?

Where is this serious investment and monies in solar and wind energy to serve the planet?

Where are these Hydrogen fuel cell cars and the infrastructure to support them, which the market forces predict will support this guidance away from the reliance upon Carbon fossil fuels and oils?

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