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  • 1. BP: An accident waiting to happenJanuary 24, 2011: 5:00 AM ETWhen Tony Hayward took over BP in 2007 - after the oil giant had experienced a series ofcalamitous accidents - he vowed that safety would be his top priority. So how did hecome to preside over one of the worst industrial disasters in history?A Fortuneinvestigation reveals a saga of hubris, ambition, and a safety philosophy thatfocused too much on spilled coffee and not enough on drilling disasters.By Peter Elkind and David Whitford with Doris BurkeApril 20 People are jumping"I allowed myself to become the lightning rod for hatred and anger," says former BP CEO Tony Hayward.It was a Tuesday evening in April, two hours past sunset. A half-lit moon hung overhead, itsimage perfectly reflected in the untroubled waters of the Gulf of Mexico. Alwin Landry, the 41-year-old Cajun captain of the Damon B. Bankston, was at his desk in the wheelhouse, writing inhis log. Chief mate Paul Erickson, an old salt with twin hoops in his left ear, was at the helm,keeping watch.The Bankston, a stout, blue-hulled supply ship with a 150-foot flatbed cargo deck in back, wasnestled port to port with the Deepwater Horizon, a drilling rig the size of a sports arena.The Bankstons mission was to ferry supplies back and forth from the shore, serving atthe Horizons beck and call.At this hour, on the night of April 20, neither vessel should have been here. The Horizon hadbeen due at its next drilling site a month before. The Bankston, in turn, was supposed to be onits way to Port Fourchon, La., for a midnight crew change. But when Landry was asked to takeon 4,500 gallons of used drilling mud, he postponed his departure. The crews ran a heavy hosefrom the rig to the Bankstons storage tanks, and the flow commenced in the early afternoon.Before they were done, though, the Horizon suspended the transfer. Landry was told to standby; no need to disconnect the hose. All was calm -- until the moment when it wasnt.Erickson saw it first: "a cascade of liquid," as he would later describe it, pouring down from therig in awful quantity, pelting the Bankston like a black rain. Landrys first thought was that thehose had ruptured, and his first feeling, even as he rushed to secure the two steel hatches on
  • 2. the bridge, was annoyance. Cleaning up this mess will take days! Then Landry looked up."When I seen the top of the derrick," he would later tell Fortune, "I realized they got a problem."Unfolding before his eyes was an almost biblical scene of destruction. Twenty stories above themain deck of the Horizon, a volcano was erupting: part seawater and part mud, borne upwardfrom the depths by a violent surge of natural gas. Birds were falling out of the sky.Landry radioed the bridge of the Horizon: "Whats going on?""Were having trouble with the well right now."Landry didnt recognize the voice, but it sounded worried -- he could hear that. Then someoneelse was speaking. Later Landry would learn that it was Curt Kuchta, the 34-year-old captain ofthe Horizon. Kuchta told Landry to back off 500 meters -- immediately.Easier said than done. "We have a hose on board," he reminded Kuchta. It was a big hose, fourinches in diameter -- the coupling alone weighed 150 pounds. Disengaging usually involved acrane."Uh ..." Kuchta paused two beats. And thats when the first explosion hit. Landry perceived it asa green flash emanating from the main deck of the rig, behind the derrick, followed by apercussive jolt, a massive fireball, and a hailstorm of debris. It knocked out all the lights,plunging the rig into darkness.Anthony Gervasio, the Bankstons engineer, was in the engine room when he heard whatsounded like a "blown tire, times 100," and rushed upstairs to investigate. He saw the mud. Hesaw the Horizon go dark. "Oh," he said to himself, and before he could get to "crap, thats notgood," the second explosion hit, much bigger than the first."Rig just blew up, we gotta go!" screamed deckhand Louis Langlois, a 340-pound Mutt toGervasios 160-pound Jeff. "Disconnect the hose!" They took off, dashing the length of thecargo deck through a maze of crates and spools, slipping and sliding on an inch of mud.Gervasio, an all-state defensive back during his high school football days in Rhode Island, gotthere first; he slapped a wrench on the joint and pulled.Captain Landry was still in the wheelhouse. He had just given the order to disconnect the hose,but now he wasnt sure he could wait. Forty feet from where he stood, the rig was in full flame.Barrels filled with volatile compounds were rocketing into the sky like missiles. He consideredgunning the throttle and going -- just ripping the hose. He knew he had enough horsepower. Butnot until he heard from his guys. "I already sent em out there," he was thinking. "I dont want topinch em in a hose."Then he saw them: Gervasio and Langlois at the back of the boat, arms raised, thumbs up, andhe saw the hose in the water, and now he was pulling back, finally putting distance betweenhimself and the inferno. With the fire growing and the Bankstons mercury-vapor lamps full on,the scene was strangely bright, surreal, all lit up like a movie set.Nevertheless, when the first flash of reflective material cut through Landrys line of sight, he toldhimself: "That cant be!"He looked at Erickson, who was looking at him. Another flash. People are jumping, they bothrealized. Horizon crew members were abandoning ship -- leaping from the main deck,plummeting 70 feet into the sea.At 10:04 p.m., Landry banged out an e-mail to the BP control room in Houston: "Horizon is onFIRE Well Blowout send out help!!!!!!!"
  • 3. The graveyardThe giant rig would burn for two days, listing more and more until finally it tipped and sank,snapping the mile-long pipe that ran between the derrick on the surface and the wellhead at thebottom of the sea and unleashing a red-brown gusher of Middle Miocene sludge. Some 206million gallons of oil would pour into the gulf before BP finally stanched the flow.Today the Macondo well, named for a cursed town in a Gabriel García Márquez novel, is sealedand abandoned. Its a graveyard for 11 men, a dump for what remains of theDeepwater Horizon, and a haunting symbol of excessive faith in the safety of deepwater drilling.Its also an enduring mystery.Its not easy to blow up an offshore oil rig. It requires an astonishing collection of failures big andsmall, human and mechanical, by individuals and by organizations. In the industrial-accidentinvestigation business, the classic metaphor is Swiss cheese. Each mistake is a hole in a singleslice, and its only when the errors stack up, with the holes aligning perfectly, that a disasterresults.Experts will debate the precise cause for years. Already the explosion at Macondo qualifies asone of the most intensely dissected industrial accidents in U.S. history, with at least nineseparate investigations by government agencies, the National Academy of Engineering, three ofthe corporations involved, and a special presidential commission, which issued a 380-pagereport on Jan. 11. The Justice Department, which is weighing criminal charges, has alreadybrought a civil case against BP, rig operator Transocean, and other companies. Plaintiffslawyers, representing everyone from the families of the Horizons dead to half-empty motels inFlorida, have filed more than 350 lawsuits. At stake are billions in fines and damages.But knowing whos to blame isnt nearly so important as understanding why this catastrophehappened -- and making sure it never happens again. A Fortune investigation reveals that thedisaster was a long time in the making, the product of a corporate culture that venerated risk
  • 4. taking even as years of merger-driven growth and successive rounds of cost cutting consumedits leaders focus.In the decade before the Deepwater Horizon, BP (BP) had a history of serious accidents. Eachtime its CEO vowed to avoid a future disaster. In 2000, after a string of fires and equipmentfailures, CEO John Browne announced plans to "renew our commitment to safety." In 2005,after a horrific explosion killed 15 people at BPs Texas City refinery, he swore thered be "nostone left unturned" to investigate what happened and correct any safety issues. In 2007, afterbeing named Brownes successor in the aftermath of more problems, Tony Hayward promisedto focus "like a laser" on safety -- only to oversee the worst oil spill in history.Fortunes investigation shows how Hayward, a fast-rising geologist once known as "TeflonTony," fell tragically short of his goal. Despite efforts to change, BP never corrected theunderlying weakness in its safety approach, which allowed earlier calamities, such as the TexasCity refinery explosion. Perhaps the most crucial culprit: an emphasis on personal safety (suchas reducing slips and falls) rather than process safety (avoiding a deadly explosion). That mightseem like a semantic distinction at first glance, but it had profound consequences.Consider this: BP had strict guidelines barring employees from carrying a cup of coffee withouta lid -- but no standard procedure for how to conduct a "negative-pressure test," a critical laststep in avoiding a well blowout. If done properly, that test might have saved the DeepwaterHorizon.Indeed, BP executives warned of serious process-safety "gaps" in the Gulf ofMexico, Fortune has learned, in a never-before-reported strategy document dated December2008. "Its become apparent," the BP document stated, "that process-safety major hazards andrisks are not fully understood by engineering or line operating personnel. Insufficient awarenessis leading to missed signals that precede incidents and response after incidents, both of whichincreases the potential for and severity of process-safety related incidents." The documentcalled for stronger "major hazard awareness."But BP failed. "They just did safety wrong," says Nancy Leveson, an industrial safety expert atMIT who served on a panel that investigated BPs safety practices after its refinery explosion;she has since taught safety classes to BP executives and also advised the presidential panelthat investigated the Deepwater Horizon disaster. "They were producing a lot of standards," shesays, "but many were not very good, and many were irrelevant." Leveson says that she was sotroubled by BPs approach that in January 2010 she told colleagues, "They are an accidentwaiting to happen."The world of the HorizonStanding on the steel deck of the Deepwater Horizon, it was easy to forget that it was a ship --even in stormy seas, its computerized positioning system kept it almost motionless.The Horizonwas many things: a drilling rig, of course, a heliport, and a floating hotel. Butfundamentally it was a very big ship.Nine years old when it sank, the Horizon was born halfway around the world, at a Hyundaishipyard in South Korea. At the time it was state-of-the-art. The rig cost R&B Falcon, its originalowner, $365 million and featured four squat legs standing on a pair of submerged pontoons.This underbody supported a 28,000-ton "drilling package." Raising that massive pile of steel
  • 5. onto the rigs legs -- a feat performed at the Korean shipyard by an Italian company, Fagioli --established a world record for the heaviest object ever lifted.Compared with its peers, the Horizon was a floating palace. With accommodations for 160, ithad a movie room, a gym, a sauna, a cave for smokers, even maid service. Its berths camecomplete with carpeting, in-room Internet, and satellite TV. The mess hall was open 24 hours.Not a bad place to be on Super Bowl Sunday, when theyd all gather to watch the game and thecook would put out nachos and hot wings.On its maiden voyage from Korea, the Horizon sailed southwest at three to four knots -- theequivalent of a slow walk -- put in for a crew change at Cape Town in South Africa, then pushednorthwest across the Atlantic, finally arriving in July 2001 at Freeport, Texas, on the Gulf ofMexico. Once the Horizon left Freeport, it would never again return to port, nor would it everleave the gulf. By then R&B Falcon was no more, having been swallowed by the Horizons newowner, a deepwater pioneer called Transocean (RIG), with nominal headquarters inSwitzerland. And Vastar Resources, the Houston-based exploration company that hadcontracted to use theHorizon? It had been bought by BP.The lightning rod"Ive got lots of time on my hands," says Tony Hayward, offering a bit of gallows humor. ItsSept. 29 -- a rainy morning in London, and two days before the CEO turns over the reins to hisdeputy, Bob Dudley. Hayward meets a Fortune writer at BPs starkly contemporaryheadquarters on St. Jamess Square before leading the way, beneath a shared umbrella, to asidewalk café a few blocks away, on Haymarket Street. As double-decker buses roar by, he sitsdown with a bottle of San Benedetto water for the first in a series of in-depth conversationswith Fortune.The BP spill, he maintains, has turned out to be much less dire than initially believed. "The storyof the environmental apocalypse is being rewritten as we speak," Hayward says. "The last thing
  • 6. the media needed was a success story. What the media wanted was a holy disaster. One of mybiggest mistakes was that I allowed myself to become the lightning rod for hatred and anger."Face to face, Tony Hayward is a bit of a surprise: personable, direct, wryly self-mocking,sarcastic, and sometimes profane. Hes also the Hayward that Americans have come to knowand scorn: wounded, defensive, and tone-deaf."I genuinely feel this could have happened to anyone," Hayward continues. "This isnt BP. Its anindustry accident." As he sees it, BPs reaction constituted "the most extraordinary corporateresponse in history." He defends his safety record, asserting that "BP has enormously morefocus on process safety than it used to," though the company is still "on its journey." Haywardconcedes that some of his comments about the environmental impacts of the spill, "taken out ofcontext," were "deeply unhelpful," but quickly adds, "I dont want to sound defensive, but muchof its turning out to be true."For now Hayward is happy to be back in England, where he says his countrymen have beensupportive, buying him drinks. Not so in the U.S. Before the Macondo well was capped,Hayward, whod been staying with the expatriate BP team at Houstons four-star Hotel Sorella,had to take refuge in an undisclosed location -- only his driver knew where he spent the night. "Iwas really being followed by the paparazzi," he says. "Not only had I become the most hatedand clueless man in America, Id become the most hunted."BPs three most recent CEOs: John Browne (left) swelled the company in an acquisition spree; Tony Hayward (center)promised an era of "silent running" before giving way to Bob Dudley after the Deepwater Horizon catastrophe.The geologist and the tray menWhen he launched his career in the oil business, Anthony Bryan Hayward seemed destined fora life in peaceful obscurity. He was completing his Ph.D. in geology at the University ofEdinburgh with a dissertation titled "Tertiary Ophiolite-Related Sedimentation in S.W. Turkey."The 420-page paper reconstructs the formation of an ancient sedimentary basin -- a hot topicfor someone interested in hunting for hydrocarbons. (The future CEOs thesis quoted lyrics fromBob Dylans protest anthem "Blowin in the Wind," including the line, "How many years can amountain exist before its washed to the sea?")The eldest of seven children, Hayward was raised in the industrial town of Slough, 20 mileswest of London. His dad was a midlevel manager at a small textile company, his mother an
  • 7. administrator in the government health service. After getting his Ph.D., Hayward signed anemployment contract with Mobil Oil, then reneged after British Petroleums chief geologistrecruited him personally. And he broke off an engagement in favor of his future wife, Maureen,whom hed met at the University of Edinburgh.BPs first century in the oil businessWhen Hayward joined BP in 1982, the company was at a critical moment. Since its founding in1909 as the Anglo-Persian Oil Co., it had operated like an arm of the British Empire. Thegovernment became its biggest shareholder, and the Middle East provided virtually all its oil. Butby the time Hayward signed on, the Arab countries had given BP the boot. The days of easyaccess to bottomless reserves were over.BP found two new sources of crude to replace a fraction of what it had lost, but in far riskierenvironments: Alaskas Prudhoe Bay and the North Sea. Hayward was dispatched to a rigexploring the Miller Field, 165 miles off the Scottish coast, in 330 feet of water. He reveled in theadventure of offshore exploration -- and he enjoyed a healthy dose of good luck. In interviewsyears later he giddily recalled the thrill of striking oil at 4 a.m. on Christmas Day, just monthsafter hed started work.Hayward happily spent his first eight years as a globetrotting field geologist, working in such far-flung locales as Mongolia and Papua New Guinea. BP prided itself on finding oil -- the Britishexplorer spirit ran deep. But it kept losing ground. Competitors derided it as a "two-pipelinecompany," too dependent on Alaska and the North Sea.BP was also hampered by a starched, rigidly hierarchical management culture dominated bycompany lifers. Each headquarters employee above a certain rank used to receive his owntowel and bar of soap on Monday morning. Senior employees, known as "tray men," got theirafternoon tea and biscuits on a tray of their own.Bureaucracy ruled and operating costs were sky-high. As a result BPs profit per employee washalf that of Exxon (XOM).All this would be left behind with the ascent of Edmund John Philip Browne, later known as LordBrowne of Madingley. Modern oils first celebrity CEO, Browne was a brilliant and charismaticman, with degrees in physics and business from Cambridge and Stanford. Browne would definethe future of BP, the entire oil industry -- and Tony Hayward.BP goes deepIn 1989, after being placed in charge of BPs flagship exploration and production business, JohnBrowne assigned the companys top 10 geologists to cook up a fresh strategy for finding oil.Hayward, then 32, was among them. They convened at a resort hotel outside London andemerged several days later with a plan.Given its size, BP needed "elephants" -- monster fields that could make a big difference in itsbottom line. To find them, the geologists concluded, it should drill in new places, where BPsdiplomatic skill, ingenuity, and daring gave it an edge -- basins where few had gone beforebecause they were either politically inaccessible or technologically difficult. The Caspian Seawas one such target; West Africa and Latin America were two others. Perhaps the most excitingprospect was deepwater -- especially in the Gulf of Mexico.For the first time, technology permitted drilling below more than a mile of water, a hostileenvironment of total darkness, crushing pressures, and brutal temperatures. Sea-floor
  • 8. operations were carried out with remotely operated vehicles, known as ROVs -- unmanned subswith stubby arms that could connect sections of drill pipe or wield tools to cut through steel.Advances in seismic imaging made it possible to locate hidden oil deposits. Drilling indeepwater was risky and expensive; a single well could cost more than $100 million. But thepayoffs were huge. The gulf had particular appeal: The U.S. offered a stable democracy, lowtaxes, and minimal regulation, as well as nearby refineries and an insatiable market.BP rushed in, acquiring offshore leases, becoming the biggest player there. Over time, thedeepwater gulf emerged as the engine of new U.S. oil production. All this was encouraged byAmerican politicians, who cut taxes for offshore drilling and opened up new swaths of ocean forexploration. Meanwhile the governments Minerals Management Service -- the drillers chiefregulator -- operated like a promotional arm of the industry. Just about everybody, it seemed,liked offshore drilling.The Sun King and Teflon TonyJohn Brownes legacy as CEO would be enormous -- for better and worse. After taking over in1995 he imposed a tough bottom-line mentality, ever focused on cutting costs. He delegatedoperating authority to his managers, who presided over their fiefdoms like mini-CEOs. But hemade each of the top 250 sign an annual "performance contract" that set out aggressive profitand productivity targets. Browne then held them personally accountable.Certain that BP needed to grow to survive, Browne built the company into a "super-major"through a whirlwind of dealmaking. He merged BP with Amoco and bought ARCO, Vastar,Burmah Castrol, and Veba. Browne negotiated moves into China and Azerbaijan and formed alucrative joint venture in Russia called TNK-BP. By the time he was done BP had more thandoubled its annual revenues (only Exxon and Shell (RDSA) were larger) and become thelargest oil producer in the U.S. Its profits and stock price multiplied. Rivals rushed to keep up.Exxon merged with Mobil; Conoco (COP) and Phillips combined; Chevron (CVX) gobbled upTexaco.Browne also transformed BPs image, recasting it as the first "green" oil company. In 1997 hebroke with the industry by acknowledging the evidence of global warming. Browne investedbillions in alternative fuels and launched a $200 million rebranding campaign. British Petroleumlegally renamed itself BP and adopted an evocative (if vague) slogan: "Beyond petroleum." BPseco-aspirations would later be derided as hypocrisy. But at the time it was magic, and theCEO was showered with honors: an Earth Day award from the United Nations, 18 honorarydegrees, acclaim as Britains "most admired" CEO. Queen Elizabeth knighted him. Dapper andcerebral, Browne collected Mapplethorpe photographs, loved opera, and attended state dinnerswith his widowed mother, who lived with him in London. He reveled in the accolades.The Financial Timeschristened him the "Sun King."If Browne was king, then Hayward was a favored prince. In 1990, Browne plucked him from thegeologist ranks and anointed him as one of his two executive assistants -- known within thecompany as "Turtles," after the comic book Teenage Mutant Ninja Turtles. Turtles dideverything from carrying Brownes bags on overseas trips to sitting in on BP board meetings.Those who impressed moved on to the fast track. Hayward would later insist that until hedbecome a Turtle, hed never wanted to be more than a geologist -- that working with Browne"opened my eyes to the world of business." But, in an interview with Fortune, Browne says the
  • 9. glint of ambition was evident: "He never struck me as someone being dragged to the throne, asit were, in the papal sense."A short history of drilling in the Gulf of MexicoIn 1992, Hayward began a string of big assignments in the field, leapfrogging more experiencedcolleagues. Browne named him exploration manager in Colombia, one of the companys primeprospects, then, three years later, president of BPs Venezuela business. Hayward was a well-liked manager: approachable, direct, and decisive.But both of those ventures were disappointments, and former colleagues say Hayward had atendency to paint a rosy picture of how much oil would be found. Says Browne: "He biasedthings to the positive. That tends to be a characteristic if you come from the pure explorationside in the oil and gas business." (Hayward acknowledges BP found less oil than expected inColombia, but asserts it turned out to be a "fantastic" investment. He blames politicalimpediments for stymieing BP in Venezuela.)Haywards setbacks in South America did nothing to slow his ascent, prompting somecolleagues to dub him "Teflon Tony." The promotions kept coming. He would have seven jobs in11 years. In 2000, at 43, Hayward was named BPs treasurer -- not exactly his field of expertise.But it was a post Browne himself had held, and it prepared him for even greater things. In 2003,Hayward joined the BP board and was named CEO of exploration and production, thecompanys No. 2 job. Says former chief geologist Richard Hubbard: "John had chosen Tony ashis heir apparent."In truth, Lord Browne didnt want to hand over his job to anyone -- at least not anytime soon.The company had announced he would retire in December 2008, at 60. But Browne wanted topull off one last spectacular deal to make BP the worlds largest oil company. He began floatingthe idea of merging with Shell -- only to be shot down by the companys board. Says then-chairman Peter Sutherland, who chairs Goldman Sachs International: "It would have been anabsolute disaster."As some directors saw it, BP hadnt yet digested the businesses it had previously acquired.They worried that Browne had moved too harshly to cut costs and bank synergies from thosedeals. "There was a general feeling that they may have been running a bit faster than theyshould have," says a former director. John Mogford, one of Brownes key lieutenants, says,"John had taken BP so far he didnt look downwards or look back. He was constantly looking forthe next thing. The next thing always, by definition, had to be bigger than the last thing.""An intolerable risk situation"For years, BP had prepared for catastrophe. Around the clock, one senior executive wasdesignated to take the call alerting London to an emergency somewhere. Consultants drilledmanagement on how to respond, staging disaster scenarios that would last two or three days.One had an oil tanker running aground in the Strait of Malacca. In another BP faced acatastrophic offshore blowout. As the choreographed episode unfolded, actors would show upon the doorstep of executives homes, assuming the role of baying reporters.On March 23, 2005, BPs crisis signal went out for real: Texas City was on fire. Located nearGalveston, Texas City was BPs biggest -- and most troubled -- oil refinery. A tank cookingflammable gasoline additives had boiled over, generating a vapor cloud that ignited with the
  • 10. backfire of a pickup truck. The blast killed 15 people and injured 180. It was Americas worstindustrial accident in a decade.BP had inherited the 71-year-old refinery from Amoco, which had long neglected maintenanceand safety upgrades. Yet after BP took it over in 1999, London demanded a 25% budget cut.Chemical releases and minor fires were routine. In the three decades before the blast, TexasCity had 23 fatalities -- three in 2004 alone. And BP management had plenty of notice: Safetyaudits and reports warned that the plant was "in complete decline," presented "an intolerablerisk situation," and posed potential for "a major site accident." A month before the explosion theplants manager showed BPs global refining chief slides of men who had been killed.For years BP had touted its safety record, pointing to a steep decline in the number of slips,falls, and vehicle accidents that generate days away from work, a statistic that is closelyfollowed by both the industry and its regulators. Under Browne, BP had established a dizzyingarray of rules that burnished this record, including prohibitions on driving while speaking on acellphone, walking down a staircase without holding a handrail, and carrying a cup of coffeearound without a lid. Bonuses for BP executives included a component tied to these personal-injury metrics. Browne says BP cut its injury rate dramatically after the Amoco merger. "Thetragedy of Texas City is that it wasnt good enough," he says.But BPs personal-safety achievements masked failures in assuring process safety. In theenergy business, process safety generally comes down to a single issue: keeping hydrocarbonscontained inside a steel pipe or tank. Disasters dont happen because someone drops a pipe onhis foot or bumps his head. They result from flawed ways of doing business that permit risks toaccumulate.At the behest of the U.S. Chemical Safety Board, BP appointed a blue-ribbon panel chaired byformer Secretary of State James Baker to study Texas City and its four other Americanrefineries. The group found "a lack of operating discipline, toleration of serious deviations fromsafe operating practices, and apparent complacency toward serious process-safety risks." Itconcluded that Brownes "decentralized management system and entrepreneurial culture" had"delegated" safety issues. BPs global safety chief, for example, reported to a Browne deputy. Inits own 341-page report, the Chemical Safety Board identified another major factor: corporatecost cutting.
  • 11. RACE TO THE BOTTOM: Click on image for full-sizeIn the explosions aftermath Browne pledged to prevent another catastrophe. But Texas Citywasnt the only major failure on his watch. Just four months later Thunder Horse, BPs giant newproduction platform in the Gulf of Mexico, nearly sank during a hurricane. In their rush to finishthe $1 billion platform, workers had installed a valve backwards, allowing the ballast tanks toflood. Inspections revealed other shoddy work. Repairs costing hundreds of millions would keepThunder Horse out of commission for three years.Then, in March 2006, corrosion in BPs Prudhoe Bay pipelines caused a 267,000-gallon oil leak-- the worst spill ever on Alaskas North Slope. This accident resulted from the companys failureto properly test and clean miles of aging pipe. (BP ultimately paid $373 million in a combinedsettlement to resolve criminal and civil charges stemming from the pipeline leaks, the Texas Cityexplosion, and unrelated charges of manipulating the propane market. The company pleadedguilty to a felony and a misdemeanor, signed a deferred-adjudication agreement, and agreed tothree years of probation. It would pay another $2.1 billion to resolve 4,000 Texas City personal-injury suits.)As U.S. criticism grew, Browne brought in a well-connected American with a reassuring accentto provide political cover. Bob Malone, the new chairman of BP America, was a native of ruralTexas and a BP veteran. Browne came to describe him as "my human shield." With Malone onpoint, BP successfully pursued what had become its standard post-disaster approach:acknowledge mistakes and open its checkbook -- but steadfastly deny that BP had a systemicproblem. Browne gave Malone unilateral authority to shut down any U.S. operation at the hint ofa safety problem.Malones authority was tested in August 2006, when word arrived of yet more corrosionproblems in BPs Alaska pipelines. Malone closed half of Prudhoe Bay -- Americas singlebiggest oilfield -- to replace miles of decaying pipe. Hayward, who had authority over oilfieldoperations as exploration chief, was sailing at the time and couldnt be reached. When he got
  • 12. back he was furious that he hadnt been consulted on such a drastic decision. But Brownebacked Malone.Having clung to his job through disasters that cost lives and billions of dollars, the Sun Kingwould lose it for a comparatively trivial mistake: He lied during a court battle in the hope ofblocking a British tabloid from publishing an exposé about his personal life. Brownes formerlover, 27-year-old Jeff Chevalier, had sold the paper his story. In the closed-door legal fight,conducted under strict English press laws, Browne falsely described how the relationship hadbegun, claiming they had met while jogging in a London park; it had actually been throughSuited and Booted, an escort service. This deceit prompted a judge to clear the story forpublication in May 2007 -- and led the BP board to accept Brownes immediate resignation.Although the scandal accelerated Brownes departure, the board had already announced hissuccessor. Says then-chairman Sutherland: "Tony Hayward was a slam-dunk."Focusing on safetyBPs new CEO immediately made it clear that hed be a less regal figure than his predecessor.Hayward had zero interest in a high profile. During his first 35 months as CEO -- until April 2010,that is -- Hayward gave just a handful of interviews. He didnt relish dealing with the press, andhed never made a point of getting good at it -- a shortcoming that would soon becomeapparent. Hayward also didnt see the value in Brownes intense political and socialinvolvements. He cut BPs government-relations staff and publicly complained that the companyemployed "too many people that were working to save the world." To deliver the message thatBP was an operating company, "not an investment bank," Hayward replaced the modernartwork Browne had installed at headquarters with photos of workers in coveralls at refineriesand on rigs.Browne had transformed BP through his frenetic dealmaking; Hayward would concentrate onproperly managing it. He promised the board a new mantra: "silent running."The first step -- indeed, Haywards mandate from the board -- was a commitment to safety.That, of course, meant avoiding any more disasters. Months after taking over, Hayward made asecond pledge: to boost BPs "dreadful" bottom line. He promised to close an $8 billion "profitgap" with Shell. That, of course, meant cutting budgets.Hayward was aware of the tension between safety, which is costly, and profits. A month beforehe was named CEO he declared, in a message to employees, that BP management had madea "virtue out of doing more for less." He explained, "The mantra of more for less says that wecan get 100% of the task completed with 90% of the resources -- which in some cases is okayand might work, but it needs to be deployed with great judgment and wisdom. When it isnt, yourun into trouble."As the new CEO saw it, he could juggle the conflicting imperatives. Hayward believed thebusiness hed inherited was inefficient and overly complex, and he could save billions -- andmake the company run better -- by cutting out layers of bureaucracy. In late 2007 he announceda major reorganization, which would include the elimination of more than 5,000 jobs. At thesame time he insisted he was beefing up BPs front-line technical expertise.Hayward became involved with safety issues in ways that Browne never had. He had previouslyhired a safety coach to teach him how to ask tough questions during work site tours. As CEO hepersonally chaired BPs risk committee. Hayward also dispatched groups of executives to the
  • 13. newly established BP "Operations Academy," a program at MIT where they spent three two-week sessions learning to better manage their businesses and deal with risk. It included a casestudy on what went wrong at Texas City.The process-safety lessons taught there are universal: Critical procedures should be formalizedand carried out with rigor; its essential to maintain multiple safeguards against an accident; it isdangerous to change operating plans on the fly; anomalies need to be clearly resolved; smallincidents are warning signs that conditions are ripe for a disaster; and a long stretch without aserious accident breeds complacency -- people forget to be afraid.The centerpiece of Haywards new approach was a sweeping plan called the OperatingManagement System, known as OMS. Even today Hayward calls OMS "my most long-standinglegacy." On paper it had much to recommend it. In much the same way as Exxon successfullydid after the Valdez spill, OMS aimed to integrate safety into every aspect of operations,theoretically making each employee responsible for safety. Fully implementing this system wasa massive undertaking that would take years. Hayward viewed it as a structure that wouldidentify and correct flaws in the way BP did business companywide and, ultimately, preventdisasters.Indeed, it was the OMS system that led BP to identify grave deficiencies in its Gulf of Mexicooperations. Its December 2008 strategic plan identified six "priority gaps." The No 1. priority:mitigating serious risk. "There are many risk processes in action," the plan stated, "but theyhave become too complicated and cumbersome to effectively manage." One chart pointed outthat a failure to address the issues could result in "multiple injuries/fatalities," "majorenvironmental damage," "catastrophic loss of the facility," and "damage to corporate reputation."In January 2010, BPs gulf team completed a plan that was supposed to tackle those problems.But just such a "catastrophic loss," of course, came only three months later -- in part becauseOMS had flaws of its own. It did a good job of integrating process safety into the planning stage,according to a presidential commission investigator, but it lacked effective procedures forguiding decisions during operations.Perhaps the best proof that OMS wasnt solving BPs process-safety problems: The companycontinued to run into trouble -- precisely where it was under the most scrutiny and had the mostincentive to improve. In 2009 the federal Occupational Safety and Health Administration (OSHA)proposed a record fine against BP for "failure to abate" previously cited hazards at Texas City.OSHA also cited BP for hundreds of new "willful" safety violations. (BP totaled 829 such refineryviolations from June 2007 to February 2010, according to the Center for Public Integrity. Therest of the industry combined had 33.) There had been three more deaths at Texas City sincethe 2005 explosion.The chairman of the federal Chemical Safety Board called the record OSHA fine evidence thatBP had "yet to achieve an effective safety culture." He noted that the company had failed tocomply with a "particularly important" CSB recommendation to appoint a process-safety expertto its board.The world didnt seem to care. By 2010, Texas City and the Thunder Horse platform were backin full production, and Haywards cost cuts had taken hold. The company had become moreprofitable than Shell, and its dividend and stock were rising. Investors and analysts lovedHayward. And by the traditional metrics of personal safety -- worker injuries -- BP was headed
  • 14. toward its best year ever. "We continue to show our ability to take on and manage risk, doingthe difficult things that others either cant do or choose not to do," Hayward declared in Februaryin BPs annual report.It had been two decades since the last big oil spill in the Gulf of Mexico. President Obamajudged operations so safe that on April 2, 2010, he announced plans to lift the 26-year ban ondrilling off the East Coast. "It turns out," he declared, "that oil rigs today generally dont causespills."April 20 "What is that?"Tuesday, April 20, was crew-change day. Among those converging on the DeepwaterHorizonwas Curt Kuchta, one of the rigs captains. He flew in from his Maryland home theprevious night, slept in a hotel near the New Orleans airport, woke up at 7 a.m. to catch thecrew bus, and boarded a helicopter in Houma, La., for the one-hour flight to the rig. A longcommute, to be sure, but not unique. Thats a big part of the appeal, for some, of 21 days on, 21days off. You get to live wherever, as long as youre willing to work wherever.No sooner had Kuchta landed on the rig and assumed command than he was back up on thehelipad to greet an arriving party of VIPs. Two executives from BP and two from Transoceanwere out for an overnight visit. A recent audit of the Horizons "safety culture" had suggestedthat management needed to do a better job bridging the "disconnect between the top boys andthe rig." The VIPs had also come to recognize a remarkable achievement: seven years withouta lost-time incident on the Deepwater Horizon.As it happens, nothing about the Deepwater Horizons current project, Macondo No. 1, hadgone smoothly. The Horizon wasnt even supposed to drill this well. Transoceans Marianas rigwas knocked out of commission in November 2009 by Hurricane Ida. So the Horizon took overin early 2010 -- and quickly encountered problems of its own. On March 8, two miles below theocean floor, the drill pipe got stuck in the rock, forcing BP to back up and drill around it.Throughout the spring, there were numerous "lost circulation" episodes, which occur whendrilling mud seeps through cracks in the wellbore, and "kicks," which signal unexpected gaspressure entering the well. All costly, all time-consuming, all potentially dangerous. Once viewedas a run-of-the-mill project, Macondo had fallen 45 days behind schedule and $58 million overbudget. Some of the crew had taken to calling it "the well from hell."Even as Kuchta led the VIPs around the rig, the metaphoric Swiss cheese slices -- thosefailures that, while tolerable individually, are potentially cataclysmic when aligned -- wereaccumulating. The final well design called for 21 centralizers to correctly position the casing (thecarbon-steel lining inside the drill hole) so the cement could provide a good seal. BP didnt havethat many centralizers on the rig and ordered more. But when they arrived, they appeared to bethe wrong kind. Using too few, BP contractor Halliburton (HAL) warned, could result in a "severegas flow problem." But facing delays and added costs, BP went with the six centralizers it hadon hand. "Who cares," BP drilling engineer Brett Cocales wrote from Houston to a colleagueaboard theHorizon. "Its done, end of story, will probably be fine."Then another slice of Swiss cheese: Halliburton, whose late founder Erle Halliburton wasmemorialized in the book Genius With Cement, prepared a foamed mixture that failed multipletests in Halliburtons own labs -- results that BP may never have seen. BP, for its part, neververified the cement was reliable.
  • 15. Yet another slice: After the cementing work was done, BP elected not to conduct a planned teston it, which would have meant more delays. Experts from Schlumberger (SLB) who had flownout to the rig to conduct the test were sent home.Now one critical task remained to identify any previously missed problems: the "negative-pressure test," designed to make sure no oil or gas was seeping into the well. The results wouldtell the crew whether it was safe to finish displacing heavy drilling mud inside the casing withlighter seawater, set the top cement plug, disconnect the drilling pipe, and move on -- a processknown as temporary abandonment. Once that was accomplished, BP would send a productionplatform to begin drawing oil from the well.The negative test almost didnt happen. Jimmy Harrell, Transoceans white-haired senior drillingofficer -- a father figure to many of the men -- was surprised to see no mention of it in BPs dailywork plan on April 19. That concerned him: A negative-pressure test is standard procedure.Normally Harrell would defer to BP. Although it had only a handful of people on the rig, BP wasthe final arbiter on all drilling decisions. But in this case, especially after all that had happenedalready, Harrell was unwilling to bend. The test went back on the schedule -- one of many last-minute changes. "There is no evidence," the presidential commission would later conclude, "thatthese changes went through any sort of formal risk assessment or management of changeprocess." More Swiss cheese.Around 5 p.m., Halliburtons Ryan Haire began the negative-pressure test. He opened a directline into the drill pipe and bled off pressure. As the pressure dropped, fluid began rising in thewell, collecting in twin 10-barrel measuring tanks. Some flow was to be expected, but not thismuch. Before long, Haire called the drilling floor: "My tanks are full," he said. "Ill have to shutthe well in."Once shut, the pressure in the well began to climb again. Both the pressure increase and therising fluids clearly indicated that somewhere hydrocarbons were invading the well. The crewtried the test twice more and got similar results. Up on the drilling floor, the decision-makerswere puzzled. BP (unlike, say, Exxon Mobil) had no established procedure for conducting thistest -- and none for interpreting the results. One veteran driller offered a convoluted explanation,suggesting that drilling mud was exerting pressure on a valve in the blowout preventer,transferring pressure to the drill pipe -- something he referred to as the "bladder effect." Adiscussion ensued. The explanation -- which investigators would later dismiss as impossible --was accepted. Nobody bothered to consult with safety experts on shore.BPs Donald Vidrine ordered the crew to perform the test yet again, this time on a side channelinto the drill pipe called a "kill line." In theory, since the kill line and drill pipe are parts of aclosed system, tests on each line should generate identical results. But this time the well passedthe test: No fluid and no pressure buildup. (Investigators would later theorize that the kill linewas clogged.) Deciding that one successful test in the kill line was more telling than three failedtests in the drill pipe, the BP men on board gave the final go-ahead: The well could be plugged.Night was falling. In a meeting room below decks the VIPs congratulated the crew on itsspotless seven-year safety record. They discussed new, more ambitious goals for 2010.Shortly after 9 p.m. the VIPs adjourned and made their way to the bridge. It was an impressiveplace, especially after dark, all glowing screens and blinking lights. They ended up at thedynamic positioning simulator, a training device that played like a videogame, designed to mimic
  • 16. extreme conditions that could knock the rig off the well. They were having fun. But the gamewas about to end.Later, analysis of real-time data would pinpoint early signs of a pressure "imbalance" deep inthe well at 6:52 p.m. Meaning that for the past couple of hours -- slowly at first, graduallygrowing in force and velocity -- hydrocarbons had been surging toward the surface. Yet the crewmembers in charge of monitoring the well failed to detect the problem.The first signal on the bridge that something was amiss was a sudden, high-frequency vibration.Everybody felt it. "What is that?" asked Captain Kuchta.April 20 "Fire! Fire! Fire!"Mike Williams, the Horizons chief electronics technician, was on the phone with his wife whenhe heard what he would later describe as "a hissing noise and a thump." He told her he had tohang up.Ships engine No. 3 began revving uncontrollably. Light bulbs popped. Computer monitorsshattered. The rig went dark. The first explosion blew Williams clear across the room. Thesecond knocked him another 35 feet. Blinded by blood from a gash in his head, gagging oncarbon dioxide, and dragging an injured leg, he made his way to the bridge.Leo Lindner, a former English professor turned drilling fluid specialist (the money was better),was asleep when the first explosion occurred. By the time the second one hit, he was out ofbed, standing barefoot in his skivvies, trying to get his bearings. The air was thick with smoke.Thats odd, Lindner thought: He could see his buddy, Ryan Haire, there on the other side ofwhat used to be a wall. He heard Yancy Keplinger on the ships intercom, yelling "Fire! Fire!Fire! This is not a drill!" He reached for some clothes. "I thought I should die with some pantson," he later toldFortune.Crew members gathered at the two forward lifeboats (the two in the rear were blocked byflames). Muster leaders with clipboards checked off names, trying to get an accurate count, buteveryone could see it was hopeless: Some crew members had already jumped. After whatseemed like an interminable delay, both boats launched, leaving a handful of people behind. Forthem, the only remaining option, short of jumping, was an inflatable life raft.Toolpusher Wyman Wheeler, gravely injured and screaming in pain, arrived on a gurney. ButWheelers helpers couldnt load the stretcher onto the raft, now dangling over the edge of thedeck. Flames were approaching. The heat was almost unbearable. Little explosions wereerupting all around them. Finally, chief engineer Steve Bertone managed to shove the gurneyinto the life raft and follow.Captain Kuchta didnt board the raft. He jumped. So did Williams. "There was so much heatcoming up, I thought for sure the life raft was going to pop or melt," Williams later toldinvestigators, "and the people inside were going to cook."It was a miracle not yet known to those still desperately trying to escape that there would be nomore dying that night. That part was over. Wheeler, like all the injured, would survive. But 10 oftheir fellow crew members had been consumed by flames on the drilling floor. Another hadfallen from the starboard crane. He was last seen lying face down on the deck in a pool of bloodby a co-worker who checked for a pulse, detected none, and fled.April 20 The sea is burning
  • 17. Louis Langlois and Anthony Gervasio, the Mutt-and-Jeff team on the Damon Bankston, saw thejumpers. Seconds after receiving the order from Captain Landry to go, they were intheBankstons rescue boat, motoring toward the burning rig.On the first sweep Langlois and Gervasio delivered four jumpers to the Bankston, then headedout again, searching for more. The Horizons forward lifeboats were descending. By now thesea itself was burning.High overhead, hanging from the main deck of the Horizon like a big orange spider on a tendrilof silk, was the raft, cocked at a crazy angle. As it came down, Horizon crew members weresplashing into the sea beside it.Langlois and Gervasio pulled five people out of the water, including Williams, still bleedingheavily. The life raft, meanwhile, was sitting right up under the edge of the rig, and it wasntmoving. Overhead a two-inch gas overflow pipe emptied beneath the main deck. It was spittingflame like an upside-down torch, laying down a puddle of fire on the water and roaring so loudlythat the rescuers, five feet apart, could barely hear each others shouts.They nudged the rescue craft in closer. Seven or eight people were in the water, trying to pullthe raft away from the flames. Langlois tossed a line to the raft, and as soon as it was secure,Gervasio threw his boat into reverse, eager to get away.But the raft wouldnt budge. The painter, a white rope, was still tied to the rig. It had a weak link -- a node thats supposed to pop under 10 pounds of force -- but for some reason it wasntpopping. Gervasio gunned the throttle. The painter grew taut, but didnt break.Luckily, Langlois had a knife, a six-inch folding Buck. He passed it to Kuchta, who swam backand cut the painter, severing the last connection to the burning rig.The scene aboard the Bankston was "controlled chaos," as Captain Landry would later describeit. His crew of 12 was hard at work: handing out boots, socks, blue jeans, and cigarettes,serving up rice and beans and hamburgers, tending to the injured. There was a logjam at thetop of theBankstons rope ladder. As each stunned Horizon crew member clambered aboard, heturned and loitered, peering over the side to see who was coming up next -- who had made itand who had not.The first headcount came up 15 short. Then 11, then 11 again, and thats where it settled.Officially the search and rescue mission continued for four days. But none among the dazedand disbelieving survivors standing in clusters on the Bankstons main deck -- some of them stillin their underwear, some crying, most simply staring fixedly across the water at the howling pyretheyd just escaped -- had any illusions about the fate of their missing comrades. "I dont knowwhat Im gonna tell his wife," one of them murmured.The first Coast Guard helicopter arrived at 11:15 p.m., screaming out of the north at 150 milesper hour, to begin carrying off the seriously injured.Not until 8:13 the following morning did the Bankston depart the scene. Normally its a 12- to 14-hour trip to Port Fourchon. But the Bankston had to make a couple of out-of-the-way stops atother rigs: first to take on two medics and drop off four Horizon crew members, who would try toactivate the rigs blowout preventer remotely; and second to board a contingent of companylawyers (for the Bankstons owner, Tidewater Marine) and government investigators who hadhelicoptered out from the mainland to begin taking statements.
  • 18. At 1:27 a.m. on Thursday, April 22, the Bankston finally arrived at C-port, slip No. 1, in PortFourchon. Waiting at the dock was a line of Porta Potties. It had been 27 hours since theexplosion -- not too late to test for alcohol and drugs. Also waiting were white buses that wouldcarry them all to a hotel in Kenner, 90 minutes north. There they were released to their lovedones -- and a world waiting to hear what had happened."Id like my life back.""Weve got a big problem in the Gulf of Mexico." Everyone at BP remembers how they got thenews. For Tony Hayward, it arrived in a voicemail at 7:24 a.m. London time -- almost four hoursafter the Deepwater Horizon blew up -- from Andy Inglis, head of exploration and production.Hayward listened to it after returning from a five-mile run in Hyde Park.BPs top executives gathered in a war room at their London headquarters, staring at CNN. Theblazing rig looked like "a big Roman candle," Hayward recalls. Boats were pouring water onto itsdeck. "Christ," Hayward told Inglis, "if we keep going like this, the bloody things going to sink!"Orders soon went out to the boats spraying the Horizon: They should lower their water cannonsto the rigs legs. As long as the Horizon stayed afloat, the gusher of hydrocarbons remainedcontained, traveling up through the mile-long riser pipe and fueling the inferno atop the rig. BPand Transocean launched a desperate effort to trigger the blowout preventer and shut off thewell before that changed.All such efforts, of course, would fail. After burning for 36 hours, the Deepwater Horizon sank at10:22 a.m. on April 22. Hayward arrived at BPs U.S. headquarters in Houston in time to get thebad news: Macondo No. 1 was gushing crude.This was a problem for which BP and its CEO were utterly unprepared. No one had ever tried toseal a hemorrhaging well a mile underwater -- or wrestled with an environmental crisis in thehothouse of the 24-hour news cycle. In Houston, Hayward took charge of the companysresponse on both the operational and PR fronts.Looking back at the 87 days it took to stop the flow of oil, its hard to fault what BP actually did --in struggling to cap the well, keep oil from reaching shore, clean the fouled beaches, andcommitting to pay the economically injured. Because BP held the Macondo lease, U.S. lawrequired it to pay all cleanup costs. But Hayward never sought to hide behind a cap passed afterthe Exxon Valdez accident, limiting damages for oil spills to $75 million. Indeed, BP will pay farmore, far more quickly, to far more people than the company would have ever had to pay in theU.S. civil court system. BP now projects its price tag for the disaster at more than $40 billion --10 times what Exxon spent in Alaska.BPs public strategy, on the other hand, was its own disaster. It overshadowed BPs response,added billions to its tab, cost Hayward his job, and even jeopardized the oil giants survival."What the hell did we do to deserve this?" Hayward asked colleagues shortly after theexplosion. The comment perfectly captured his perspective: BP hadnt done anything wrong.Hayward downplayed the size and significance of the spill and minimized BPs role. "It wasntour accident," he said, blaming both Transocean and the "unprecedented" failure of the rigsblowout preventer.BP repeatedly raised expectations that it would soon end the crisis. A tipping point came fiveweeks in, when its "top kill/junk shot" failed -- after Hayward had predicted a 60% to 70%
  • 19. chance of success. Says a senior company executive, the message was clear: "Dont trust BP.They dont know what the fuck theyre doing."Hayward made matters worse, attaining infamy when he vented his own frustration. Hed beenin the U.S. for weeks. He and his family had received death threats. His wife (who had joined aFacebook group called "Lay off Tony Hayward!") had undergone surgery while he was away.And he was spending much of his time leading tours of sludge-stained beaches for reporters,who demanded to know how he felt about destroying the livelihood of so many strugglingAmericans. "Were sorry," Hayward replied to the cameras in Venice, La. "Were sorry for themassive disruption its caused to their lives." Then, sounding annoyed: "And you know, theresno one who wants this thing over more than I do. Id like my life back."By June the situation had mushroomed into a national rage. President Obama told NBC he wasseeking advice on "whose ass to kick." Congress began drafting proposals to bar BP from U.S.waters. The companys stock dropped 48%, wiping out $91 billion in market value.This was generating what BPs current CEO, Bob Dudley, describes as a "near-death"experience. BP, which funded its working capital needs with about $10 billion in short-termpaper, found itself shut out of the overnight markets. Trading partners shunned the company. Aliquidity crisis loomed. Hayward says he directed his financial team to shore up the businesswith fresh bank lines, to make BP "bulletproof." He adds: "If we hadnt dealt with it in a verydraconian way, we would have had a big problem."It was then, on June 16, that Hayward led a BP delegation summoned to the White House.What resulted was widely portrayed in the press as a corporate capitulation. BP would establisha $20 billion escrow fund to pay damage claims. To preserve cash, the company would suspendits quarterly dividend for the rest of 2010.In truth, BP got what it desperately needed, starting with a limit on its damages outlay --enormous, to be sure, but manageable for a company that had made $6 billion in the firstquarter of 2010. Obama also promised to end his market-rattling assault, telling the world, "BPis a strong and viable company, and it is in all of our interests that it remain so." Says Hayward:"We needed political calmness. We needed to stop being attacked by the most powerfulgovernment in the world."The next day Hayward appeared before a congressional subcommittee, where lawmakers tookturns berating him. He then flew home for a break -- and a final PR disaster. Hayward wasphotographed in a yacht race off the Isle of Wight, sailing with his son in the spill-free Englishwaters. Said White House Chief of Staff Rahm Emanuel mockingly: "Hes got his life back.""Systematic failures … in the entire industry"BP finally stopped the leak on July 15 and permanently sealed Macondo by cementing it shutthree weeks later. By this point, trust in BP had sunk so low that it had to spend an extra $2billion until the well could be sealed from the bottom after it had already been closed from thetop. Hayward, meanwhile, was history. BP had named Mississippi native Bob Dudley as itsfirst American CEO, effective Oct. 1.As the other investigations dragged on, BP was quick to offer its own judgment. In a 192-pagereport released last fall, the company admitted oversight mistakes but placed most of theblame on its contractors, especially Transocean and Halliburton. Dismissing widespreadcriticism of its well design as irrelevant, BP cited the flawed cement work, concluding that it had
  • 20. allowed gas to enter the well through the bottom; the botched negative-pressure test; the rigcrews failure to respond to signs of trouble; and the impotence of the blowout preventer. BPsconclusion was that the Horizon was an industry accident, with lessons for all, not an indictmentof its own practices.In truth, any fair reckoning of responsibility places BP at the top of the list. Its contractors madecritical mistakes. But at virtually every step, BP made decisions that increased risk anddisplayed a lack of oversight and operational discipline. All were failures in process safety -- andall saved the company time and money. As the presidential commission noted, BPs recordsuggests "its approach to managing safety has been on individual worker occupational safetybut not on process safety. These incidents and subsequent analyses indicate that the companydoes not have consistent and reliable risk-management processes -- and thus has been unableto meet its professed commitment to safety."That said, its also perilous to assume that BP stands alone. The offshore-drilling industry hasexperienced a chilling array of accidents in the past decade -- fires, blowouts, oil spills, andclose calls -- including 20 in the gulf. As the presidential commission observed, "The Macondowell blowout can be traced to a series of identifiable mistakes made by BP, Halliburton, andTransocean that reveal such systematic failures in risk management that they place in doubt thesafety culture of the entire industry."Today the Gulf of Mexico is back open for business. Beaches are largely clean, the vastmajority of its fishing waters no longer off limits. The oil has receded from view -- thanks in goodpart to the gulfs warm natural ecosystem, filled with bacteria that rapidly consume oil. But thelasting environmental impact remains uncertain. A recent Audubon Society report called it "thelargest uncontrolled science experiment in our country."Dudley has announced a major reorganization, aimed at averting yet another disaster. Hecreated a new safety division with broad powers to intervene in company operations. And BPfinally appointed a board member with expertise in process safety.A visit with BPs new CEOFortune met with Dudley at BPs London headquarters in November. Dudley is more careful withhis words than Hayward, the personification of likable calm. But though his tone and accent aredifferent, the substance of his message is eerily familiar.Dudley says that what happened in the gulf is "complicated -- theres multiple causes." He says,"I do not believe that BP is an unsafe company," but acknowledges, "We clearly now have to goone more step in terms of putting in place another organization that will have checks andbalances over our line organization." Rather than "just run from" risk, as he puts it, "we want todo this as well as anybody in the industry, if not the best ... Because if you learn to manage risk,a company can actually take on more risk. And that will only come in time."Dudley insists that BP made great strides on safety over the past decade. "If you put aside thisMacondo incident," he says without irony, "2009 was the best year wed had, and 2010 was alsoheading in that direction." Spoken like a true BP man.