Macondo mess triggers BP shakeup

October 26, 2010

BP put the final nail in the Macondo coffin 19 September with a successful relief well kill, ending a five-month ordeal that began with the deaths of 11 offshore workers and spilled some 5 million barrels of crude into the Gulf of Mexico.

Now comes the task of repairing the company’s image, which has been hammered by accusations that BP’s safety record has suffered at the expense of costcutting and lax oversight. At the end of September,as Bob Dudley (pictured, left) prepared to take over as BP chief executive from Tony Hayward, the company announced a restructuring of its upstream division, the creation of a beefed-up safety unit, and the ousting of Andy Inglis (pictured, right), who stepped down as head of upstream and announced plans to leave the company by the end of 2010.

The company’s single upstream business unit will be broken into separate exploration, development and production segments, BP said, and headed by executive vice presidents Mike Daly, Bernard Looney and Bob Fryar, respectively. All will report directly to Dudley.

BP also said it would ‘conduct a fundamental review’ of the group’s incentives program with the goal of encouraging greater safety oversight.

‘These are the first and most urgent steps in a program I am putting in place to rebuild trust in BP – the trust of our customers, of governments, of our employees and of the world at large,’ Dudley said. ‘The changes are in areas where I believe we most clearly need to act, with safety and risk management our most urgent priority.’

Dudley also announced that he had selected safety and operations chief Mark Bly (pictured, right) to head up the new Safety & Operational Risk division. The unit will embed staff at the company’s exploration projects and refineries and have the authority to audit compliance and enforce common safety standards.

A 2005 explosion at BP’s Texas City refinery killed 15 workers. Last year, the US Occupational Safety & Health Administration slapped BP with $87 million in fines, saying the company hadfailed to address safety issues identified after the explosion.

Earlier in September, BP announced that it would join Chevron, ExxonMobil, ConocoPhillips and Shell as a partner in the Marine Well Containment Company, the group set up to develop a deepwater spill containment system based on lessons learned during the Gulf of Mexico spill response (OE August). The company will make available the equipment and expertise amassed during the Macondo relief operation.

Also in September, BP released the results of a four-month internal investigation into the incident that blamed ‘a sequence of failures involving a number of different parties’ for the disaster, including a faulty cement job as the Mississippi Canyon block 252 exploration well in 5000ft water depths was being temporarily P&A’d.

The report cited ‘a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces’ that led to the blowout and fire, but said it was ‘unlikely’ that the fault lay with BP’s own well design.

BP’s contractors on the job immediately fired back. Deepwater Horizon rig owner Transocean called the report ‘self-serving’ and accused BP of making ‘a series of cost-saving decisions that increased risk – in some cases, severely.’

Those decisions included the use of a long production string rather than a casing tieback, failure to run a cement bond log, and using fewer centralizers than recommended in the well’s design, ‘dramatically increasing the risk of cement channeling and gas flow,’ said Transocean, which is conducting its own investigation into the disaster.

Halliburton, which was involved in the well’s cementing operations, said the BP report contained ‘a number of substantial omissions and inaccuracies’.

‘Contractors do not specify well design or make decisions regarding testing procedures as that responsibility lies with the well owner,’ Halliburton said.

Dudley takes over during what he called ‘a deeply challenging time for BP’. ‘Our response to the [Macondo] incident needs to go beyond deepwater drilling,’ he said.

‘There are lessons for us relating to the way we operate, the way we organize our company and the way we manage risk.’ OE



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