British Petroleum is not to blame!

Everybody is to blame! When a disaster involves the oil industry, Halliburton, US government regulators, nationalism and even, on the far right fringes, Norman Tebbit - what would you really expect? The only company to escape blame, please note America, is British Petroleum, a company that has not existed since 2001.

The presidential commission investigating the Gulf of Mexico oil spill has concluded,

The well blew out because a number of separate risk factors, oversights, and outright mistakes combined to overwhelm the safeguards meant to prevent just such an event from happening. But most of the mistakes and oversights at Macondo can be traced back to a single overarching failure—a failure of management. Better management by BP, Halliburton, and Transocean would almost certainly have prevented the blowout by improving the ability of individuals involved to identify the risks they faced, and to properly evaluate, communicate, and address them. 

So far only Chapter Four of the report has been published but the commission states, as explicitly as any official report ever can, that this disaster came about because of the culture of the industry. This can not be filed in the 'cock-up' folder. 

The blowout was not the product of a series of aberrational  decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent [sic] significant reform in both industry practices and government policies, might well recur. 

The whole mismanagement is neatly summed up in an e-mail from Brett Cocales to Brian Morel, two BP engineers on April 16. Cocales had argued that 21 centralizers, components that ensure the integrity of the concrete well, were necessary but then concluded the e-mail by saying, 

"But, who cares, it’s done, end of story, [we] will probably be fine and we’ll get a good cement job. I would rather have to squeeze [remediate the cement job] than get stuck above the WH [wellhead]. So Guide is right on the risk / reward equation."

For me, however, nothing in the report is quite as sinister as Cocales' rather throwaway reference to to the 'the risk / reward equation'. Those four words sum up the cynicism at the heart of this industry's business philosophy. What they are saying is: how little can we do to be seen to comply with basic safety and and environmental standards without threatening the profitability of the business. Clearly, they are prepared to take substantial risks, with lives, the environment and people's livelihoods. Yet the profits are huge. In 2009 BP made a profit of £25.1 billion. The company is valued at £95 billion. In a recession that is a pretty good yield. £1 in every £7 paid as dividends from FTSE 100 companies was paid by BP. 

What possible reason is there for pushing so hard on the margins of safety- “it will probably be fine.” It is pure greed. The bottom line is how much money can we make without going to jail. Last year Halliburton, who were heavily criticised in the report for using cement to seal the well that they knew had already failed nine stability tests, pleaded guilty in a US court, alongside former subsidiary KBR, to paying Nigerian officials more than $180 million in bribes to win a $6 billion gas contract.  KBR executive, Albert “Jack” Stanley was sentenced to seven years in prison and were fined a record $579 million. According to the LA Times, in December 2010 Halliburton and KBR have agreed a further payout: about $250 million and in return other Halliburton and KBR executives will stay out of jail. According to the report, the extra 15 centralizers, which were on site and may well have stopped the tragedy, were disregarded because they would have taken an extra 10 hours to install. It's about priorities, isn't it?

So Brett Cocales "Who cares?" I suppose the families of the eleven men who died on the rig might care. The thousands who have lost their livelihoods and anyone who cares for the environment would be a little concerned. Professor Ed Overton, an environmental scientist at Louisiana State University told the BBC that the oil will not totally vanish, some animals and coral may never return while it will take dolphins, sharks and whales up to 20 years to recover their numbers. At least one in ten birds is expected to die but in the long term no one really knows what to expect, "We know almost nothing about the effect of oil on the ecology in the deep ocean," says Professor Overton. 

The report concludes that it is impossible to apportion a precise share of blame to the individual companies. BP failed to address the true risks of the operation. Transocean, who managed the rig, had recently experienced a similar problem at another site but failed to advise their staff on the Deep Water Horizon rig. According to the report their staff were inexperienced and poorly trained in emergency drills. Many warning signs were missed or ignored. Hallibuton provided substandard materials and remarkably the explosion occurred shortly after Joseph E Keith, an employee of the Halliburton subsidiary Sperry Sun, failed to realise that the well was filling with dangerous levels of crude oil and natural gas because he was in the canteen, having a smoke and a cup of coffee. Finally, the US government was condemned for failing to provide the oversight necessary to prevent these lapses in judgment and management by private industry. In other words the regulators believed the companies when they promised they were being safe. 

Analysts believed that the report was generally 'good news' for BP. In the Telegraph, Jason Kenney, an oil and gas analyst said. "It's a bit of pressure relief for BP, because it'll be able to spread the burden and hopefully recover costs from partners." BP's final liabilities are estimated to be £25.8 billion unless the US authorities pursue negligence charges, which would carry unlimited damages. It is a possible threat to  all three companies, but the general feeling amongst commentators is that 'gross' negligence will be difficult to prove. Despite this uncertainty analysts expect the BP share price to rise over 20% this year. President Obama is expected to allow deep water drilling to resume in the Gulf of Mexico within the next few weeks. So, in effect, despite a temporary blip in profits (although a pretty substantial blip), the companies will be able to carry on. The report's contention that it is now clear that both industry and government need to reassess and change business practices seems a forlorn hope. 

Following Lazbot's post yesterday I was struck by one aspect of the environmental damage that had not come under much scrutiny. According to Dr Larry McKinney, director of the Harte Research Institute for Gulf of Mexico Studies, "there has been a plus side, for fish, severe as the damage might be, it will be mitigated by the break in fishing. They have closed such large areas of the Gulf that the pressure has been reduced and will allow more fish to remain alive and reproduce." Stocks of fish like red snapper could be back to normal within two to four years. It's uncomfortable thought that some aspects of the environment may be better off despite the disaster. 

The report fails to identify the true culprits in all of this. The oil industry might well be driven by greed and run by despicable people but they are only exploiting our own greedy and despicable qualities. The report acknowledges that deepwater drilling provides the nation with essential supplies of oil and gas. In our precarious environmental position essential is a pretty damning indictment of all of us. 

Perhaps Norman Tebbit was right after all? "Get on yer bikes."