Bp’s record shows trail of bold risks and blun­ders

Austin American-Statesman - - FRONT PAGE - By Sarah Lyall, Clif­ford Krauss and Jad Mouawad

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

Con­tin­ued from A 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.

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 that BP ap­pointed to in­ves­ti­gate the com­pany’s re­finer­ies af­ter a deadly 2005 ex­plo­sion at its Texas City 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 such as An­gola and Azer­bai­jan and pushed technology to the limit in the re­motest reaches of Alaska and the deep­est wa­ters of the Gulf — “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 U.S. com­peti­tors such as 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.

Al­though the in­ci­dent 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 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 in­ci­dent re­flected a cor­po­rate dis­re­gard for safety.

BP is not 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 Bryant, who ran BP’s op- er­a­tions in An­gola from 2000 to 2004 and who is now chief ex­ec­u­tive of Cobalt In­ter­na­tional En­ergy.

Time and again, BP has in­sisted that it has learned how to bal­ance risk and safety, ef­fi­ciency and profit. Yet the ev­i­dence sug­gests that fun­da­men­tal change has been elu­sive.

Re­vis­it­ing Texas City in 2009, in­spec­tors from the Oc­cu­pa­tional Safety and Health Ad­min­is­tra­tion found more than 700 safety vi­o­la­tions and pro­posed a record fine of $87.4 mil­lion — top­ping the ear­lier record BP set in the 2005 ac­ci­dent. Most of the penal­ties, the agency said, were be­cause BP had failed to fully live up to the pre­vi­ous set­tle­ment.

In March, OSHA found 62 vi­o­la­tions at BP’s Ohio re­fin­ery and pro­posed an­other $3 mil­lion in penal­ties.

“Se­nior man­age­ment told us they are very se­ri­ous about safety, but we ob­served that they haven’t trans­lated their words into safe work­ing pro­ce­dures and prac­tices, and they have dif­fi­culty ap­ply­ing the lessons learned from re­fin­ery to re­fin­ery or even from within re­finer­ies,” said David Michaels, as­sis­tant sec­re­tary of la­bor for OSHA.

BP is con­test­ing OSHA’s al­le­ga­tions, say­ing it has made sub­stan­tial im­prove­ments at both fa­cil­i­ties.

Ac­ci­dents have also con­tin­ued to plague BP’s pipe­lines in Alaska. Most re­cently, on May 25, a power fail­ure led to a leak that over­whelmed a stor­age tank and spilled about 200,000 gal­lons of oil — the third-largest spill on the Trans-Alaska Pipe­line Sys­tem.

Dud­ley, the BP ex­ec­u­tive over­see­ing the Gulf re­sponse, said it was un­fair to blame cul­tural fail­ings at BP for the string of in­ci­dents.

“I don’t ac­cept, and have not wit­nessed, this cut­ting of cor­ners and the sac­ri­fice of safety to drive re­sults,” he said.

Henry Wax­man, chair­man of the House com­mit­tee in­ves­ti­gat­ing the Deep­wa­ter Hori­zon in­ci­dent, has a dif­fer­ent view dur­ing hear­ings a month ago.

“BP cut corner af­ter corner to save a mil­lion dol­lars here and a few hours there,” he said. “And now the whole Gulf Coast is pay­ing the price.”

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