Feb. 15 (Bloomberg) -- On April 20, 2010, BP’s Deepwater Horizon rig exploded, killing 11 men and injuring 17. During the next three months, 200 million gallons of oil gushed uncontrollably into the Gulf of Mexico, leading to the worst ecological disaster in U.S. history.
Former BP Chief Executive John Browne was forced to resign after a sex scandal in 2007, but the risk-taking, cost-cutting culture he created during his 12-year tenure may have contributed to the disaster.
“In Too Deep: BP and the Drilling Race That Took It Down” by Bloomberg journalists Stanley Reed and Alison Fitzgerald takes a close look at how things went so terribly wrong. I spoke with Fitzgerald on the telephone.
Lundborg: When you were digging into this story, what surprised you the most?
Fitzgerald: There is a widespread sense in the industry and in government that BP was a worse operator, a more dangerous operator, than other oil companies, even before the spill happened.
Lundborg: In the book you describe BP as “swashbuckling.” How does that play out?
Fitzgerald: The whole culture at BP glorified the people who worked in difficult places -- the geologists and the scientists and the explorers.
It was a culture created by John Browne, who loved deal-making with the bad guys. He really relished going to Russia and meeting with Putin and cutting a deal, or meeting in the middle of the desert with Qaddafi.
Lundborg: You point out that he was a closeted gay man, who preferred Hockney and cooking classes to macho Texas swagger. How did Browne flourish in this macho industry?
Fitzgerald: He was very good at what he did. He made big deals, taking BP from being a mid-size player into being one of the largest. That can get you through a lot of doors.
Lundborg: He was also a ruthless cost-cutter. Wasn’t that part of the problem?
Fitzgerald: That’s a key issue. Browne cut things to the bone at the company, and it was across the board. Every unit had to be profitable. Every person, every executive, was measured by the performance of his own unit.
Safety wasn’t protected from the cuts. It’s not that John Browne said, “Oh, screw safety.” He ordered the cuts blind: “We need to cut the costs by 25 percent, and you deal with it.”
Nobody was willing to say, “You know what, Browne, this is not possible. We can’t operate this way properly.”
Lundborg: A BP company report said that the culture evolved to “ignore risk, tolerate noncompliance, and accept incompetence,” but even after it’s spelled out, nothing happens?
Fitzgerald: There’s a stack of previous reports that were done by BP internally, by government agencies, by outside groups, about what was wrong. The conclusions were almost always the same, and for some reason it never changed.
Lundborg: So Halliburton knew there were problems with the cement?
Fitzgerald: Halliburton did know there were problems with the cement.
Lundborg: And Transocean knew that there had been no maintenance on the blowout preventer?
Lundborg: In fact, all the systems on the blowout preventer failed?
Fitzgerald: Exactly. Everyone had bits of info and nobody put it all together since the communication was so horrible.
Lundborg: Ultimately, a few bad decisions on this rig almost took down one of the world’s largest companies. What was the worst?
Fitzgerald: The key decision that was probably most closely linked to the actual blowout was when the rig managers decided to pump heavy drilling mud out of the Macondo well and replace it with seawater.
They misread a test that suggested that this well was stable, and they misread it badly. And there were no strict guidelines on how to perform the test, number one, nor how to read the test results, nor what to do if the results conflict.
Lundborg: BP’s recovery plan was, as you point out, a “bald-faced lie?”
Fitzgerald: Just to give them a small bit of benefit of the doubt, it was the exact same recovery plan for every oil company in the Gulf.
It was completely unrealistic. And what was revealed in this disaster was they also had absolutely no idea -- and not just BP, nobody -- what to do if the blowout happened at the bottom of the ocean.
Worst PR Mistake
Lundborg: After the disaster, what was BP’s worst PR mistake?
Fitzgerald: The moment when CEO Tony Hayward said, “I’d like to get my life back.”
Lundborg: How’s the new guy, Robert Dudley, doing?
Fitzgerald: He’s said all the right things, and he’s starting to do a lot of the right things. He’s actually made some really good deals recently.
But he’s been at BP for more than a decade, and he is a John Browne acolyte. Whether or not he will be substantively different, only time will tell.
Lundborg: Why is the company’s dependence on deep-water drilling only going to accelerate?
Fitzgerald: Partly, that’s what they’re good at. Plus, in order to raise $20 billion, they sold oil fields, and a lot of what they sold were the more shallow-water fields. They kept the leases on places they hadn’t yet developed.
“In Too Deep” is published by Bloomberg Press, an imprint of John Wiley & Sons. To buy this book in North America, click here.
(Zinta Lundborg is an editor for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are her own. This interview was adapted from a longer conversation.)
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