Saturday, June 19, 2010

BP and the Unmitigated Disaster

By Alan Caruba

The Gulf of Mexico could turn into a giant dead zone if some means cannot be found to staunch the flow of oil and toxic gases emerging from the damaged well beneath the Deepwater Horizon. Industry insiders who understand the engineering of wells are beginning to speak openly among themselves of an unmitigated disaster.

It is essential to understand that the oil business is like no other. Oil companies that drill too many dry holes go out of business. Oil is too often in places run by despots and gangsters that would make Hollywood villains seem tame by comparison. Oil companies must deal with them even at the risk they will renege on their promises; something they do a lot.

The oil business depends on technology that attempts to give geologists an idea of what is hidden way below the surface of the land or water. It often means having to team up with your competitors to finance an operation such as building a pipeline so both can move their crude oil to refineries.

Beyond that, oil companies do not set the price of oil. OPEC does not set the price of oil. Traders do that and they do it 24/7. You can lose money by not having enough oil and you can lose money from having too much oil that has to be stored until the price improves.

With the exception of a tanker spill in the 1980s, among the major oil companies ExxonMobil has an extraordinary record of safety. Its company ethos is such that decisions are made only after serious consideration and its emphasis has always been on managing to achieve the best results with the least amount of risk, primarily by paying attention to good practices. Its management is not flashy and does not seek the spotlight.

In contrast, British Petroleum has always been about risk and about cutting corners. Prior to CEO Tony Hayward who was pushed aside by its board of directors after two months of saying the wrong thing at the wrong time during the Deepwater Horizon disaster, BP was largely a reflection of John Browne, an egotist who was driven to build the company through mergers and buy-outs. His interest in the engineering and technological aspects of the business was minimal.

As Tom Bowers, the author of “Oil: Money, Politics and Power in the 21st Century”, put it, Browne’s “mantra of ‘more for less’ to boost BP’s share price was a poisoned chalice.”

The result was that BP routinely paid multi-million dollar fines for breaking U.S. environmental and safety laws, including admitting to outright fraud. No other oil company has a comparable record of safety violations. In two separate incidents prior to the Gulf oil rig explosion, 30 BP workers had been killed and more than 200 were seriously injured.

By skimping on safety a Texas City refinery explosion not only dealt a blow to BP’s reputation, but the estimated minimum cost in lost profits and compensation was calculated to be $4 billion. BP had decided to save money by not insuring the facility against the possibility of such an accident. By extension, it increased the public’s distrust of the oil industry.

In an article about its safety record, it was noted that Occupational Safety and Health Administration statistics showed that BP “ran up 760 ‘egregious, willful’ safety violations,” while Sunoco and Conoco-Phillips each had eight, Citgo had two and ExxonMobil had only one such citation.

Oil companies run their own trading operations and BP ran afoul of the law when it conspired to manipulate the propane gas market, ripping off $53 million from consumers who depended on it to heat their homes.

BP through its lobbyists and corporate representatives worked to influence Congress and reportedly played “a major role in drafting the Kerry-Lieberman bill”, the Cap-and-Trade Act currently waiting for a vote in the Senate. It is based on blatantly false "global warming science" and is a tax on energy use.

Under the leadership of John Browne, BP more than any other oil company, actively sought to re-brand itself from being an oil company to being an advocate for the environment, using an advertising motto, “Beyond petroleum” and supporting the fraudulent “global warming” hoax. With Browne at the helm, he promised that BP would invest $1 billion in solar energy by 2010 and invest $8 billion in alternative energies over ten years.

It did not, apparently, invest in the kind of engineering and inspection of rig construction that might have prevented the explosion on the Deepwater Horizon. The event and previous explosions at its refineries were the result of years of an internal BP philosophy that focused on profits before safety. Whether it was accident prone refineries or corrosion in the Alaska pipeline, BP cut corners.

Even when Browne reached the mandatory retirement age of 60 in 2008, he did everything in his power to avoid it. He had run out of support in the company he had built through his quest to be among the largest, if not the largest, oil company in the world. By then, however, it was too late to save BP from what, in hindsight, was an inevitable disaster.

Suffice it to say that everything that could go wrong following the Deepwater Horizon explosion has gone wrong. The oil industry has never been faced with an engineering failure of this magnitude.

For the creatures of the Gulf, it is an ecological disaster of biblical proportions. For the coastal states affected, it is an economic disaster that will rapidly eat through the $20 billion BP has pledged to set aside for remediation over the next five years. The losses to the nation as a whole are probably incalculable at this point.

Industry insiders believe that neither BP, nor the Obama administration, are telling the public the truth, nor the full ramifications of what will occur if the blowout preventer, all 450 tons of it, literally tips over deep below the waters of the Gulf.

“It won’t be long after that the entire system fails,” predicted a writer in Oil “BP must be aware of this. They are mapping the sea floor sonically and that is not a mere exercise. Our government must be aware too, but they are just not telling us.”

It is essential to keep in mind that this is a BP problem. It is not something for which the entire oil industry should be blamed. America runs on oil and, if the politicians will just get out of the way, we shall have it.

© Alan Caruba, 2010


sykes.1 said...

Read the referred article.

This is shaping up as a disaster worse than Chernobyl.

One that will be ongoing for years until the reserve drains out.

LarryOldtimer said...

Agreed, Alan. IMHO, this is a direct result of the huge change in management philosophy which occurred circa 1970. Before that, managers in control of people using any technology had to have knowledge of and personal experience with the technology involved.

The new philosophy of management is that managers in control of people using technology need have no personal experience or any knowledge of the technology being used by those whose actions they control. The John Browne is one of that sort of manager, and it is evident that he was calling all of the shots, and completely disregarded the advice of people who did have the needed knowledge and experience of the technology.

I am a retired professional civil engineer with a good deal of knowledge and experience in hydraulic flow pertaining to water. The pressure at the point of drilling in this exploratory well is obviously huge, and I think that the rate of flow of this particular well is virtually unheard of in the oil industry. Hence the acceptance of preliminary estimates which were only a small amount of the actual flow.

It is quite possible that the flow from this well can't be stopped in the foreseeable future without risking a blowout of the entire well.

The relief wells being drilled may not be of significant effect in reducing the flow from this well.

We are no more "addicted" to petroleum than we addicted to water, food to eat or air to breathe. So-called alternative sources of the energy our civilization has to have to continue our existence are nowhere near up to the task.

Several previous acts of Congress would have to be suspended to mitigate this national disaster in any meaningful way, and with the present administration and Congress I just don't see that happening any time soon.

It is going to be a long summer, and with hurricane season here, no one knows what will happen, except that it can't possibly be good.

Ronbo said...

We are living ATLAS SHRUGGED.

The Great BP Oil Disaster of 2010 reminds me of "Project X" in the book which turns a large part of the USA into ruins due to the actions of government bureaucrats and scientists who violate the axiom that "nature to be commanded must be obeyed."

When I read ATLAS SHRUGGED as a teenager, I was blown away by Ayn Rand's philosophy of Objectivism. At the age of 61, I realize that she was a prophet as well.

TexasFred said...

I don't believe anyone can even remotely imagine nor predict the full ramifications of this disaster...

EdgarSwank said...

I would like to briefly defend BP and indite the Federal Government as being mainly responsible.

As explained by Judge Napolitano on Fox News, BP wanted to drill in the Gulf nearer shore (but still over the horizon) in 5 HUNDRED feet of water. This was OK with the government of Louisiana. The technology of drilling safely at 5 hundred feet is well established. But the federal government would only grant leases in 5 THOUSAND feet of water. Neither the federal government nor BP has had much experience drilling and monitoring operations at that depth.

In addition, the federal government distorted the market by passing a law limiting liability for an oil spill to $75 MILLION. That cannot be constitutionally changed retroactively (ex post facto law). So the $20 billion was just a shakedown.

Ronbo said...

I agree, Edgar.

Most of the responsibility goes to the federal bureaucrats and parasite socialist politicians who have become an army of occupation over a once Free Republic.

Unknown said...

EdgarS, do some checking on BP. Also, look up Chevron's "Jack #6" for a deepwater project.

BP has a nasty rep for cutting corners and for safety violations. Several hundred of the latter, vs. very few for the other majors--as in single digit. This is not the first incident with fatalities.

The Browne regime changed BP into being a greedy hog for profit, and devil take the rest of the world. Profit is all well and good, but not at the expense of people's deaths.

Frank said...

Why is the government still letting these criminals be in charge of cleaning up this mess? Exxon kicked them off the clean up (which BP initially was in charge) for the Exxon Valdez disaster.

However, appropriate safety regulations could have helped prevent this disaster. Appropriate regulations could have protected the People.

Of course the government has, for decades now, been on a campaign to put corporations before the People, so this is not a surprise.

Don't forget Haliburton. It was Chaney that wanted to save the $500,000 to not install blow-out preventors on wells like this. He wanted larger profits for Haliburton. Halibuton is another foreign corporation (they moved out of the US a few years back) and they were a partner on this rig.

I agree with you that BP is grossly incompetent, if not criminally liable.

check out this video for interesting information about BP from the locals on the Gulf:

There is another item here.

BP cannot drill like they do in US waters in their home country...England. They cannot drill like this in many other countries. It is illegal and not approved by many governments whom put their People's lands/environment and their People before their corporations.

Remotely activated blow out preventors and other safety measures are required in many countries...even as close as our Canadian neighbors.

In the US, oil companies have very lax safety laws to follow. To make matters worse, many wells are simply exempted from these measures. Apparently, if one has enough meth or cocaine and prostitutes, they can easily sway the regulators (this is widely reported/confirmed).

AND the Bush and the Obama administration commonly grant exemptions for the lax regulations that oil companies must follow in the US.

We need more stringent safety laws in the US.

Think about it...what will cost BP more? The money they saved by not investing in safety gear OR the PR disaster that this spill disaster is doing to their worth in the stock market.

AND Obama granted another five environmental exemptions as Bush did for this rig of BP and Haliburton's. They have granted many more since the spill.

Unknown said...

Frank, a comment today from Gary North, published at the LewRockwell website:

"The oil spill that threatens Louisiana is symbolic of the end of an era. Government regulation was supposed to make this impossible. The public has put great faith in the ability of tenured bureaucrats to make things safe for Americans. The Federal Register publishes 70,000 pages of small-type regulations every year. This never ends.

Supposedly, this army of regulators and libraries of pulp-paper rules are supposed to let us preserve our way of life. Then, without warning, the platform blew up. The regulatory agency that supposedly monitored all this had rubber-stamped the authorization to skip the normal testing procedures.

The head of this obscure agency resigned her position. I suspect she was asked to resign. This sent a message to senior appointees in every agency: More paperwork! No latitude! This will no doubt lead to a new era of agencies that tie up progress in reams of red tape. And so it goes."

Key: "The regulatory agency that supposedly monitored all this had rubber-stamped the authorization to skip the normal testing procedures."

This seems to me to be a "usual case" situation: It's not the absence of "enough regulations" so much as it is the lack of intelligent enforcement of what is in place.

Unknown said...

Take a look at this site the next time you hear about the "disaster" in the Gulf. It's very interesting.