In BP’s Record, a History of Boldness and Costly Blunders
Copyright 2011, THE NEW YORK TIMES
By Sarah Lyall
Published July 12, 2010
This article was reported by Sarah Lyall, Clifford Krauss and Jad Mouawad and written by Ms. Lyall.
Hurricane Dennis had already come and gone on July 11, 2005, when a passing ship spotted a shocking sight in the Gulf of Mexico: Thunder Horse, BP’s hulking $1 billion oil platform, was listing precariously to one side, looking for all the world as if it were about to sink.
Towering 15 stories above the water’s surface, Thunder Horse was meant to be the company’s crowning glory, the embodiment of its bold gamble to outpace its competitors in finding and exploiting the vast reserves of oil beneath the waters of the gulf.
Instead, the rig, which was supposed to produce about 20 percent of the gulf’s oil output, became a symbol of BP’s hubris. A valve installed backward had caused the vessel to flood during the hurricane, jeopardizing the project before any oil had even been pumped. Other problems, discovered later, included a welding job so shoddy that it left underwater pipelines brittle and full of cracks.
“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 — much like the Deepwater Horizon.”
The problems at Thunder Horse were not an anomaly, but a warning that BP was taking too many risks and cutting corners in pursuit of growth and profits, according to analysts, competitors and former employees. Despite a catalog of crises and near misses in recent years, BP has been chronically unable or unwilling to learn from its mistakes, an examination of its record shows.
“They were very arrogant and proud and in denial,” said Steve Arendt, a safety specialist who assisted the panel appointed by BP to investigate the company’s refineries after a deadly 2005 explosion at its Texas City, Tex., facility. “It is possible they were fooled by their success.”
Indeed, there was a great deal of success to admire. In little more than a decade, BP grew from a middleweight into the industry’s second-largest company, behind only Exxon Mobil, with soaring profits, fat dividends and a share price to match.
From its base in London, the company struck bold deals in politically volatile areas like Angola and Azerbaijan and pushed technology to the limit in the remotest reaches of Alaska and the deepest waters of the Gulf of Mexico — “the tough stuff that others cannot or choose not to do,” as its chief executive, Tony Hayward, once put it.
The company also led an industry wave of cost-cutting and consolidation. It took over American competitors like Amoco and Atlantic Richfield and eliminated tens of thousands of jobs in several rounds, streamlining management but forcing the company to rely more heavily on outside contractors.
For a long time, BP’s strategy seemed to pay off. But on April 20, the nightmare situation occurred: the Deepwater Horizon drilling rig exploded, killing 11 workers and sending millions of gallons of oil gushing from BP’s Macondo well like so much black poison.
Although the accident is still under investigation, preliminary findings by Congressional investigators indicate that BP made a series of decisions that compounded the chances of disaster.
BP declined to make Mr. Hayward or other executives available for this article. But in an interview last month, Robert Dudley, the BP board member now in charge of the gulf spill response, denied that the accident reflected a corporate disregard for safety.
“I think we will find that this was an incredibly complicated set of events with individual decisions and equipment failures that led to a very complicated industrial accident,” he said.
BP is hardly the only oil company that has taken on difficult projects with a shaky safety net. But the company’s attitude toward risk stands in contrast to that of its competitors, most notably Exxon Mobil, whose searing experience with the Exxon Valdez spill in 1989 spurred a wholesale change in its approach to safety.
“You can have the best intentions in the world, you can have the best equipment in the world, but it’s a combination of intentions, equipment and judgment that keeps accidents out of the workplace,” said Joseph H. Bryant, who ran BP’s operations in Angola from 2000 to 2004 and who is now chief executive of Cobalt International Energy. “If you are going to ask people to innovate, you’d better make sure that they know that any risks they take are manageable.”
A Focus on the Basics
When Tony Hayward became BP’s chief executive in May 2007, he promised to get the company back to basics.
One of his first moves was to remove the modern art adorning the company’s swanky London headquarters, including an endless video of gently waving corn projected onto one wall. In its place went prosaic photographs of BP service stations, platforms and pipelines.