Hounded by US President Barack Obama and his legal henchmen, BP will need extraordinary courage and skill to avoid sliding into the abyss. The combination of Washington’s politicians in full cry to save their skins, lawyers lusting for massive fees to pursue Big Oil and the national outcry by irate citizens demanding revenge is more than Tony Hayward, BP’s hapless chief executive, ever bargained for when he inherited the poisoned chalice from John Browne in 2007.
Oil is a risky business, and BP has survived many disasters — natural and man-made — but there is no precedent for the raw anger about its technical incompetence generated by the Gulf of Mexico crisis. At the heart of US fury with BP is the knowledge that the corporation was exposed three times between 2004 and 2006 for causing death and destruction because of ruthless cost-cutting, poor maintenance and avoidance of basic safety laws. The litany of excuses uttered by BP executives to congressional hearings explaining an oil spill in Alaska, an explosion at the company’s refinery in Texas City that killed 15 and the tilting of the Thunder Horse oil platform in the Gulf of Mexico fed anger in Washington and across the US.
At the heart of this disaster is not only the lack of confidence engendered by Hayward’s weak media performances, but the professional limitations affecting so many members of senior BP management. Unlike the brainwashing standardization inculcated into ExxonMobil’s recruits or the discipline imposed on Shell engineers, BP has always delighted in employing mavericks who shoot from the hip. In Washington and Houston, Texas, however, politicians and rival oil people know that the company took too many risks in expanding not only in oil production, but also in oil trading. Recently, BP’s oil and gas traders have been censured for manipulating markets. In the US, the lingering suspicion that BP was a rogue corporation has hardened into certainty.
Here Comes The Sun
Oil people are intelligent, rational and usually decent. BP’s explorers excel in finding oil in the most difficult environments, especially in the Gulf of Mexico. That triumph helped John Browne — the so-called Sun King — transform a dying corporation in the early 1990s into the world’s second-biggest oil company.
However, in the process, Browne ripped out the very skills that would have prevented the present disaster, or at least would have made the corporation more adept at finding an answer.
Browne’s penny-pinching, Hayward admitted after becoming chief executive, compounded by “dreadful” bureaucracy and inefficiency, had impaired the company’s performance. Hayward’s remedies proceeded at a snail’s pace and now it is nearly too late. Restoring the corporation in the current crisis needs a superman. Hayward does not fit the description.
However, BP remains a hugely successful corporation. The insatiable demand for oil practically ensures its survival. Any opportunistic takeover bid by a major rival will be stymied by laws preventing the formation of cartels. Any attempt to strip BP of its assets in the US will consume US courts for a generation.
Those threatening to destroy BP’s finances by fining it should remember that Exxon was fined US$5 billion after the Exxon Valdez spill in 1989, but 19 years later successfully got the supreme court to reduce the damages to US$500 million: two days’ profits. Hayward’s head will probably be one price of BP’s survival, but he always knew that oil was a risky business.
Tom Bower is the author of The Squeeze: Oil, Money and Greed in the 21st Century.
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