BP Strategy and the Deepwater Horizon Disaster Answer the questions by drafting a single spaced 2 page paper in MS Word. Include 10 short headings in the paper relating to each question. Save the file by including your last name in the file name. While this was an unpleasant environmental disaster, involved the loss of life, and shut down businesses, that is not the point of the article for this course. BP experienced some strategic problems before the disaster, during the disaster, and after the disaster. Case Questions 1. What external environment (general, industry, and competitive) segments do you think BP considered or didn’t consider prior to their drilling off the Gulf Coast? 2. How should BP have handled an external environmental analysis and what environmental changes and trends (opportunities and threats) might they have discovered? 3. After the fact, use the five forces of competition model, to determine the industry’s attractiveness in terms of profit potential. 4. Based on the case provided, who might be in BP’s strategic group and why? 5. What would a competitor of BP discover about them in a competitor analysis? 6. Describe BP’s strategic relationship with other companies directly involved in the incident? Consider this from an international strategy point of view. 7. Would it have been wise for another company to acquire or merge with BP after this incident? Shell was being considered for a merger earlier. Consider the reasons for doing so and the problems with success. 8. What type of strategic alliance was BP involved in at this time frame? 9. Assess the effectiveness of the board of directors for BP. 10. Describe the relationship between governance mechanisms and ethical behavior at BP. BP Horizon Case When Tony Hayward took over BP in 2007 - after the oil giant had experienced a series of calamitous accidents - he vowed that safety would be his top priority. So how did he come to preside over one of the worst industrial disasters in history? A Fortune investigation reveals a saga of hubris, ambition, and a safety philosophy that focused too much on spilled coffee and not enough on drilling disasters. April 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, its image 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 in his 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, was nestled port to port with the Deepwater Horizon, a drilling rig the size of a sports arena. The Bankston's mission was to ferry supplies back and forth from the shore, serving at the Horizon's beck and call. At this ...

1. BP Strategy and the Deepwater Horizon Disaster
Answer the questions by drafting a single spaced 2 page paper
in MS Word. Include 10 short headings in the paper relating to
each question. Save the file by including your last name in the
file name.
While this was an unpleasant environmental disaster, involved
the loss of life, and shut down businesses, that is not the point
of the article for this course. BP experienced some strategic
problems before the disaster, during the disaster, and after the
disaster.
Case Questions
1. What external environment (general, industry, and
competitive) segments do you think BP considered or didn’t
consider prior to their drilling off the Gulf Coast?
2. How should BP have handled an external environmental
analysis and what environmental changes and trends
(opportunities and threats) might they have discovered?
3. After the fact, use the five forces of competition model, to
determine the industry’s attractiveness in terms of profit
potential.
4. Based on the case provided, who might be in BP’s strategic
group and why?
5. What would a competitor of BP discover about them in a
competitor analysis?
6. Describe BP’s strategic relationship with other companies
directly involved in the incident? Consider this from an
international strategy point of view.
7. Would it have been wise for another company to acquire or
merge with BP after this incident? Shell was being considered
for a merger earlier. Consider the reasons for doing so and the
problems with success.
8. What type of strategic alliance was BP involved in at this
time frame?
9. Assess the effectiveness of the board of directors for BP.

2. 10. Describe the relationship between governance mechanisms
and ethical behavior at BP.
BP Horizon Case
When Tony Hayward took over BP in 2007 - after the oil giant
had experienced a series of calamitous accidents - he vowed
that safety would be his top priority. So how did he come to
preside over one of the worst industrial disasters in history? A
Fortune investigation reveals a saga of hubris, ambition, and a
safety philosophy that focused too much on spilled coffee and
not enough on drilling disasters.
April 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, its image 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 in his 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, was nestled port to port with the
Deepwater Horizon, a drilling rig the size of a sports arena. The
Bankston's mission was to ferry supplies back and forth from
the shore, serving at the Horizon's beck and call.
At this hour, on the night of April 20, neither vessel should
have been here. The Horizon had been due at its next drilling
site a month before. The Bankston, in turn, was supposed to be
on its way to Port Fourchon, La., for a midnight crew change.
But when Landry was asked to take on 4,500 gallons of used
drilling mud, he postponed his departure. The crews ran a heavy
hose from the rig to the Bankston's storage tanks, and the flow
commenced in the early afternoon. Before they were done,
though, the Horizon suspended the transfer. Landry was told to

3. stand by; no need to disconnect the hose. All was calm -- until
the moment when it wasn't.
Erickson saw it first: "a cascade of liquid," as he would later
describe it, pouring down from the rig in awful quantity, pelting
the Bankston like a black rain. Landry's first thought was that
the hose had ruptured, and his first feeling, even as he rushed to
secure the two steel hatches on 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 the main deck of the Horizon,
a volcano was erupting: part seawater and part mud, borne
upward from the depths by a violent surge of natural gas. Birds
were falling out of the sky.
Landry radioed the bridge of the Horizon: "What's going on?"
"We're having trouble with the well right now."
Landry didn't recognize the voice, but it sounded worried -- he
could hear that. Then someone else was speaking. Later Landry
would learn that it was Curt Kuchta, the 34-year-old captain of
the 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, four inches in diameter -- the
coupling alone weighed 150 pounds. Disengaging usually
involved a crane.
"Uh ..." Kuchta paused two beats. And that's when the first
explosion hit. Landry perceived it as a green flash emanating
from the main deck of the rig, behind the derrick, followed by a
percussive jolt, a massive fireball, and a hailstorm of debris. It
knocked out all the lights, plunging the rig into darkness.
Anthony Gervasio, the Bankston's engineer, was in the engine
room when he heard what sounded like a "blown tire, times
100," and rushed upstairs to investigate. He saw the mud. He
saw the Horizon go dark. "Oh," he said to himself, and before

4. he could get to "crap, that's not good," the second explosion hit,
much bigger than the first.
"Rig just blew up, we gotta go!" screamed deckhand Louis
Langlois, a 340-pound Mutt to Gervasio's 160-pound Jeff.
"Disconnect the hose!" They took off, dashing the length of the
cargo 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, got there
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 wasn't 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 considered gunning the throttle
and going -- just ripping the hose. He knew he had enough
horsepower. But not until he heard from his guys. "I already
sent 'em out there," he was thinking. "I don't want to pinch 'em
in a hose."
Then he saw them: Gervasio and Langlois at the back of the
boat, arms raised, thumbs up, and he saw the hose in the water,
and now he was pulling back, finally putting distance between
himself and the inferno. With the fire growing and the
Bankston's 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 Landry's line of sight, he told himself: "That can't be!"
He looked at Erickson, who was looking at him. Another flash.
People are jumping, they both realized. 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 on FIRE Well Blowout send out
help!!!!!!!"
The graveyard
The giant rig would burn for two days, listing more and more

5. until finally it tipped and sank, snapping the mile-long pipe that
ran between the derrick on the surface and the wellhead at the
bottom of the sea and unleashing a red-brown gusher of Middle
Miocene sludge. Some 206 million 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 sealed and abandoned. It's a graveyard
for 11 men, a dump for what remains of the Deepwater Horizon,
and a haunting symbol of excessive faith in the safety of
deepwater drilling. It's also an enduring mystery.
It's not easy to blow up an offshore oil rig. It requires an
astonishing collection of failures big and small, human and
mechanical, by individuals and by organizations. In the
industrial-accident investigation business, the classic metaphor
is Swiss cheese. Each mistake is a hole in a single slice, and it's
only when the errors stack up, with the holes aligning perfectly,
that a disaster results.
Experts will debate the precise cause for years. Already the
explosion at Macondo qualifies as one of the most intensely
dissected industrial accidents in U.S. history, with at least nine
separate investigations by government agencies, the National
Academy of Engineering, three of the corporations involved,
and a special presidential commission, which issued a 380-page
report on Jan. 11. The Justice Department, which is weighing
criminal charges, has already brought a civil case against BP,
rig operator Transocean, and other companies. Plaintiffs
lawyers, representing everyone from the families of the
Horizon's dead to half-empty motels in Florida, have filed more
than 350 lawsuits. At stake are billions in fines and damages.
But knowing who's to blame isn't nearly so important as
understanding why this catastrophe happened -- and making
sure it never happens again. A Fortune investigation reveals that
the disaster was a long time in the making, the product of a
corporate culture that venerated risk taking even as years of
merger-driven growth and successive rounds of cost cutting

6. consumed its leaders' focus.
In the decade before the Deepwater Horizon, BP (BP) had a
history of serious accidents. Each time its CEO vowed to avoid
a future disaster. In 2000, after a string of fires and equipment
failures, CEO John Browne announced plans to "renew our
commitment to safety." In 2005, after a horrific explosion killed
15 people at BP's Texas City refinery, he swore there'd be "no
stone left unturned" to investigate what happened and correct
any safety issues. In 2007, after being named Browne's
successor in the aftermath of more problems, Tony Hayward
promised to focus "like a laser" on safety -- only to oversee the
worst oil spill in history.
Fortune's investigation shows how Hayward, a fast-rising
geologist once known as "Teflon Tony," fell tragically short of
his goal. Despite efforts to change, BP never corrected the
underlying weakness in its safety approach, which allowed
earlier calamities, such as the Texas City refinery explosion.
Perhaps the most crucial culprit: an emphasis on personal safety
(such as reducing slips and falls) rather than process safety
(avoiding a deadly explosion). That might seem 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 without a lid -- but no standard
procedure for how to conduct a "negative-pressure test," a
critical last step in avoiding a well blowout. If done properly,
that test might have saved the Deepwater Horizon.
Indeed, BP executives warned of serious process-safety "gaps"
in the Gulf of Mexico, Fortune has learned, in a never-before-
reported strategy document dated December 2008. "It's become
apparent," the BP document stated, "that process-safety major
hazards and risks are not fully understood by engineering or
line operating personnel. Insufficient awareness is leading to
missed signals that precede incidents and response after
incidents, both of which increases the potential for and severity
of process-safety related incidents." The document called for
stronger "major hazard awareness."

7. But BP failed. "They just did safety wrong," says Nancy
Leveson, an industrial safety expert at MIT who served on a
panel that investigated BP's safety practices after its refinery
explosion; she has since taught safety classes to BP executives
and also advised the presidential panel that investigated the
Deepwater Horizon disaster. "They were producing a lot of
standards," she says, "but many were not very good, and many
were irrelevant." Leveson says that she was so troubled by BP's
approach that in January 2010 she told colleagues, "They are an
accident waiting to happen."
The world of the Horizon
Standing 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
Horizon was many things: a drilling rig, of course, a heliport,
and a floating hotel. But fundamentally it was a very big ship.
Nine years old when it sank, the Horizon was born halfway
around the world, at a Hyundai shipyard in South Korea. At the
time it was state-of-the-art. The rig cost R&B Falcon, its
original owner, $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 onto the rig's 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, it had a movie room, a gym, a
sauna, a cave for smokers, even maid service. Its berths came
complete 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 they'd all gather to watch the game and the
cook would put out nachos and hot wings.
On its maiden voyage from Korea, the Horizon sailed southwest
at three to four knots -- the equivalent of a slow walk -- put in
for a crew change at Cape Town in South Africa, then pushed

8. northwest across the Atlantic, finally arriving in July 2001 at
Freeport, Texas, on the Gulf of Mexico. Once the Horizon left
Freeport, it would never again return to port, nor would it ever
leave the gulf. By then R&B Falcon was no more, having been
swallowed by the Horizon's new owner, a deepwater pioneer
called Transocean (RIG), with nominal headquarters in
Switzerland. And Vastar Resources, the Houston-based
exploration company that had contracted to use the Horizon? It
had been bought by BP.
The lightning rod
"I've got lots of time on my hands," says Tony Hayward,
offering a bit of gallows humor. It's Sept. 29 -- a rainy morning
in London, and two days before the CEO turns over the reins to
his deputy, Bob Dudley. Hayward meets a Fortune writer at
BP's starkly contemporary headquarters on St. James's Square
before leading the way, beneath a shared umbrella, to a
sidewalk café a few blocks away, on Haymarket Street. As
double-decker buses roar by, he sits down with a bottle of San
Benedetto water for the first in a series of in-depth
conversations with Fortune.
The BP spill, he maintains, has turned out to be much less dire
than initially believed. "The story of the environmental
apocalypse is being rewritten as we speak," Hayward says. "The
last thing the media needed was a success story. What the media
wanted was a holy disaster. One of my biggest 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. He's also the Hayward that Americans have
come to know and scorn: wounded, defensive, and tone-deaf.
"I genuinely feel this could have happened to anyone," Hayward
continues. "This isn't BP. It's an industry accident." As he sees
it, BP's reaction constituted "the most extraordinary corporate
response in history." He defends his safety record, asserting that
"BP has enormously more focus on process safety than it used
to," though the company is still "on its journey." Hayward

9. concedes that some of his comments about the environmental
impacts of the spill, "taken out of context," were "deeply
unhelpful," but quickly adds, "I don't want to sound defensive,
but much of it's turning out to be true."
For now Hayward is happy to be back in England, where he says
his countrymen have been supportive, buying him drinks. Not so
in the U.S. Before the Macondo well was capped, Hayward,
who'd been staying with the expatriate BP team at Houston's
four-star Hotel Sorella, had to take refuge in an undisclosed
location -- only his driver knew where he spent the night. "I was
really being followed by the paparazzi," he says. "Not only had
I become the most hated and clueless man in America, I'd
become the most hunted."
BP's 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 men
When he launched his career in the oil business, Anthony Bryan
Hayward seemed destined for a life in peaceful obscurity. He
was completing his Ph.D. in geology at the University of
Edinburgh 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 topic for someone interested in hunting for hydrocarbons.
(The future CEO's thesis quoted lyrics from Bob Dylan's protest
anthem "Blowin' in the Wind," including the line, "How many
years can a mountain exist before it's washed to the sea?")
The eldest of seven children, Hayward was raised in the
industrial town of Slough, 20 miles west of London. His dad
was a midlevel manager at a small textile company, his mother
an administrator in the government health service. After getting
his Ph.D., Hayward signed an employment contract with Mobil
Oil, then reneged after British Petroleum's chief geologist
recruited him personally. And he broke off an engagement in

10. favor of his future wife, Maureen, whom he'd met at the
University of Edinburgh.
BP's first century in the oil business
When Hayward joined BP in 1982, the company was at a critical
moment. Since its founding in 1909 as the Anglo-Persian Oil
Co., it had operated like an arm of the British Empire. The
government became its biggest shareholder, and the Middle East
provided virtually all its oil. But by the time Hayward signed
on, the Arab countries had given BP the boot. The days of easy
access to bottomless reserves were over.
BP found two new sources of crude to replace a fraction of what
it had lost, but in far riskier environments: Alaska's Prudhoe
Bay and the North Sea. Hayward was dispatched to a rig
exploring the Miller Field, 165 miles off the Scottish coast, in
330 feet of water. He reveled in the adventure of offshore
exploration -- and he enjoyed a healthy dose of good luck. In
interviews years later he giddily recalled the thrill of striking
oil at 4 a.m. on Christmas Day, just months after he'd 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
British explorer spirit ran deep. But it kept losing ground.
Competitors derided it as a "two-pipeline company," too
dependent on Alaska and the North Sea.
BP was also hampered by a starched, rigidly hierarchical
management culture dominated by company lifers. Each
headquarters employee above a certain rank used to receive his
own towel and bar of soap on Monday morning. Senior
employees, known as "tray men," got their afternoon tea and
biscuits on a tray of their own.
Bureaucracy ruled and operating costs were sky-high. As a
result BP's profit per employee was half that of Exxon (XOM).
All this would be left behind with the ascent of Edmund John
Philip Browne, later known as Lord Browne of Madingley.
Modern oil's first celebrity CEO, Browne was a brilliant and

11. charismatic man, with degrees in physics and business from
Cambridge and Stanford. Browne would define the future of BP,
the entire oil industry -- and Tony Hayward.
BP goes deep
In 1989, after being placed in charge of BP's flagship
exploration and production business, John Browne assigned the
company's 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 and emerged several days later
with a plan.
Given its size, BP needed "elephants" -- monster fields that
could make a big difference in its bottom line. To find them, the
geologists concluded, it should drill in new places, where BP's
diplomatic skill, ingenuity, and daring gave it an edge -- basins
where few had gone before because they were either politically
inaccessible or technologically difficult. The Caspian Sea was
one such target; West Africa and Latin America were two
others. Perhaps the most exciting prospect was deepwater --
especially in the Gulf of Mexico.
For the first time, technology permitted drilling below more
than a mile of water, a hostile environment of total darkness,
crushing pressures, and brutal temperatures. Sea-floor
operations were carried out with remotely operated vehicles,
known as ROVs -- unmanned subs with 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 in deepwater was risky and expensive; a
single well could cost more than $100 million. But the payoffs
were huge. The gulf had particular appeal: The U.S. offered a
stable democracy, low taxes, 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, the deepwater gulf emerged as the
engine of new U.S. oil production. All this was encouraged by
American politicians, who cut taxes for offshore drilling and
opened up new swaths of ocean for exploration. Meanwhile the

12. government's Minerals Management Service -- the drillers' chief
regulator -- operated like a promotional arm of the industry.
Just about everybody, it seemed, liked offshore drilling.
The Sun King and Teflon Tony
John Browne's legacy as CEO would be enormous -- for better
and worse. After taking over in 1995 he imposed a tough
bottom-line mentality, ever focused on cutting costs. He
delegated operating authority to his managers, who presided
over their fiefdoms like mini-CEOs. But he made each of the
top 250 sign an annual "performance contract" that set out
aggressive profit and 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 a lucrative joint venture
in Russia called TNK-BP. By the time he was done BP had more
than doubled its annual revenues (only Exxon and Shell (RDSA)
were larger) and become the largest 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 up Texaco.
Browne also transformed BP's image, recasting it as the first
"green" oil company. In 1997 he broke with the industry by
acknowledging the evidence of global warming. Browne
invested billions in alternative fuels and launched a $200
million rebranding campaign. British Petroleum legally renamed
itself BP and adopted an evocative (if vague) slogan: "Beyond
petroleum." BP's eco-aspirations would later be derided as
hypocrisy. But at the time it was magic, and the CEO was
showered with honors: an Earth Day award from the United
Nations, 18 honorary degrees, acclaim as Britain's "most
admired" CEO. Queen Elizabeth knighted him. Dapper and
cerebral, Browne collected Mapplethorpe photographs, loved
opera, and attended state dinners with his widowed mother, who

13. lived with him in London. He reveled in the accolades. The
Financial Times christened him the "Sun King."
If Browne was king, then Hayward was a favored prince. In
1990, Browne plucked him from the geologist ranks and
anointed him as one of his two executive assistants -- known
within the company as "Turtles," after the comic book Teenage
Mutant Ninja Turtles. Turtles did everything from carrying
Browne's 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 he'd become a Turtle, he'd
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 glint of ambition was
evident: "He never struck me as someone being dragged to the
throne, as it were, in the papal sense."
A short history of drilling in the Gulf of Mexico
In 1992, Hayward began a string of big assignments in the field,
leapfrogging more experienced colleagues. Browne named him
exploration manager in Colombia, one of the company's prime
prospects, then, three years later, president of BP's 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 a tendency to paint a rosy picture
of how much oil would be found. Says Browne: "He biased
things to the positive. That tends to be a characteristic if you
come from the pure exploration side in the oil and gas
business." (Hayward acknowledges BP found less oil than
expected in Colombia, but asserts it turned out to be a
"fantastic" investment. He blames political impediments for
stymieing BP in Venezuela.)
Hayward's setbacks in South America did nothing to slow his
ascent, prompting some colleagues to dub him "Teflon Tony."
The promotions kept coming. He would have seven jobs in 11
years. In 2000, at 43, Hayward was named BP's treasurer -- not
exactly his field of expertise. But it was a post Browne himself

14. 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, the company's No. 2 job. Says
former chief geologist Richard Hubbard: "John had chosen Tony
as his heir apparent."
In truth, Lord Browne didn't 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 to pull off one last spectacular deal to make BP
the world's largest oil company. He began floating the idea of
merging with Shell -- only to be shot down by the company's
board. Says then-chairman Peter Sutherland, who chairs
Goldman Sachs International: "It would have been an absolute
disaster."
As some directors saw it, BP hadn't yet digested the businesses
it had previously acquired. They worried that Browne had
moved too harshly to cut costs and bank synergies from those
deals. "There was a general feeling that they may have been
running a bit faster than they should have," says a former
director. John Mogford, one of Browne's key lieutenants, says,
"John had taken BP so far he didn't look downwards or look
back. He was constantly looking for the 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 was designated to take the call alerting
London to an emergency somewhere. Consultants drilled
management 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 a
catastrophic offshore blowout. As the choreographed episode
unfolded, actors would show up on the doorstep of executives'
homes, assuming the role of baying reporters.
On March 23, 2005, BP's crisis signal went out for real: Texas
City was on fire. Located near Galveston, Texas City was BP's

15. biggest -- and most troubled -- oil refinery. A tank cooking
flammable gasoline additives had boiled over, generating a
vapor cloud that ignited with the backfire of a pickup truck. The
blast killed 15 people and injured 180. It was America's worst
industrial accident in a decade.
BP had inherited the 71-year-old refinery from Amoco, which
had long neglected maintenance and 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, Texas City had 23 fatalities -- three in
2004 alone. And BP management had plenty of notice: Safety
audits and reports warned that the plant was "in complete
decline," presented "an intolerable risk situation," and posed
potential for "a major site accident." A month before the
explosion the plant's manager showed BP's 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 closely
followed by both the industry and its regulators. Under Browne,
BP had established a dizzying array of rules that burnished this
record, including prohibitions on driving while speaking on a
cellphone, walking down a staircase without holding a handrail,
and carrying a cup of coffee around 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. "The tragedy of Texas City is that it
wasn't good enough," he says.
But BP's personal-safety achievements masked failures in
assuring process safety. In the energy business, process safety
generally comes down to a single issue: keeping hydrocarbons
contained inside a steel pipe or tank. Disasters don't happen
because someone drops a pipe on his foot or bumps his head.
They result from flawed ways of doing business that permit
risks to accumulate.
At the behest of the U.S. Chemical Safety Board, BP appointed

16. a blue-ribbon panel chaired by former Secretary of State James
Baker to study Texas City and its four other American
refineries. The group found "a lack of operating discipline,
toleration of serious deviations from safe operating practices,
and apparent complacency toward serious process-safety risks."
It concluded that Browne's "decentralized management system
and entrepreneurial culture" had "delegated" safety issues. BP's
global safety chief, for example, reported to a Browne deputy.
In its own 341-page report, the Chemical Safety Board
identified another major factor: corporate cost cutting.
RACE TO THE BOTTOM: Click on image for full-size
In the explosion's aftermath Browne pledged to prevent another
catastrophe. But Texas City wasn't the only major failure on his
watch. Just four months later Thunder Horse, BP's giant new
production platform in the Gulf of Mexico, nearly sank during a
hurricane. In their rush to finish the $1 billion platform,
workers had installed a valve backwards, allowing the ballast
tanks to flood. Inspections revealed other shoddy work. Repairs
costing hundreds of millions would keep Thunder Horse out of
commission for three years.
Then, in March 2006, corrosion in BP's Prudhoe Bay pipelines
caused a 267,000-gallon oil leak -- the worst spill ever on
Alaska's North Slope. This accident resulted from the company's
failure to properly test and clean miles of aging pipe. (BP
ultimately paid $373 million in a combined settlement to
resolve criminal and civil charges stemming from the pipeline
leaks, the Texas City explosion, and unrelated charges of
manipulating the propane market. The company pleaded guilty
to a felony and a misdemeanor, signed a deferred-adjudication
agreement, and agreed to three 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 accent to provide political cover.
Bob Malone, the new chairman of BP America, was a native of

17. rural Texas and a BP veteran. Browne came to describe him as
"my human shield." With Malone on point, BP successfully
pursued what had become its standard post-disaster approach:
acknowledge mistakes and open its checkbook -- but steadfastly
deny that BP had a systemic problem. Browne gave Malone
unilateral authority to shut down any U.S. operation at the hint
of a safety problem.
Malone's authority was tested in August 2006, when word
arrived of yet more corrosion problems in BP's Alaska
pipelines. Malone closed half of Prudhoe Bay -- America's
single biggest oilfield -- to replace miles of decaying pipe.
Hayward, who had authority over oilfield operations as
exploration chief, was sailing at the time and couldn't be
reached. When he got back he was furious that he hadn't been
consulted on such a drastic decision. But Browne backed
Malone.
Having clung to his job through disasters that cost lives and
billions of dollars, the Sun King would lose it for a
comparatively trivial mistake: He lied during a court battle in
the hope of blocking a British tabloid from publishing an
exposé about his personal life. Browne's former lover, 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 had begun,
claiming they had met while jogging in a London park; it had
actually been through Suited and Booted, an escort service. This
deceit prompted a judge to clear the story for publication in
May 2007 -- and led the BP board to accept Browne's immediate
resignation.
Although the scandal accelerated Browne's departure, the board
had already announced his successor. Says then-chairman
Sutherland: "Tony Hayward was a slam-dunk."
Focusing on safety
BP's new CEO immediately made it clear that he'd 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

18. 2010, that is -- Hayward gave just a handful of interviews. He
didn't relish dealing with the press, and he'd never made a point
of getting good at it -- a shortcoming that would soon become
apparent. Hayward also didn't see the value in Browne's intense
political and social involvements. He cut BP's government-
relations staff and publicly complained that the company
employed "too many people that were working to save the
world." To deliver the message that BP was an operating
company, "not an investment bank," Hayward replaced the
modern artwork Browne had installed at headquarters with
photos of workers in coveralls at refineries and on rigs.
Browne had transformed BP through his frenetic dealmaking;
Hayward would concentrate on properly managing it. He
promised the board a new mantra: "silent running."
The first step -- indeed, Hayward's mandate from the board --
was a commitment to safety. That, of course, meant avoiding
any more disasters. Months after taking over, Hayward made a
second pledge: to boost BP's "dreadful" bottom line. He
promised to close an $8 billion "profit gap" with Shell. That, of
course, meant cutting budgets.
Hayward was aware of the tension between safety, which is
costly, and profits. A month before he was named CEO he
declared, in a message to employees, that BP management had
made a "virtue out of doing more for less." He explained, "The
mantra of 'more for less' says that we can get 100% of the task
completed with 90% of the resources -- which in some cases is
okay and might work, but it needs to be deployed with great
judgment and wisdom. When it isn't, you run into trouble."
As the new CEO saw it, he could juggle the conflicting
imperatives. Hayward believed the business he'd inherited was
inefficient and overly complex, and he could save billions --
and make the company run better -- by cutting out layers of
bureaucracy. In late 2007 he announced a major reorganization,
which would include the elimination of more than 5,000 jobs.
At the same time he insisted he was beefing up BP's front-line
technical expertise.

19. Hayward became involved with safety issues in ways that
Browne never had. He had previously hired a safety coach to
teach him how to ask tough questions during work site tours. As
CEO he personally chaired BP's risk committee. Hayward also
dispatched groups of executives to the 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 case study on what
went wrong at Texas City.
The process-safety lessons taught there are universal: Critical
procedures should be formalized and carried out with rigor; it's
essential to maintain multiple safeguards against an accident; it
is dangerous to change operating plans on the fly; anomalies
need to be clearly resolved; small incidents are warning signs
that conditions are ripe for a disaster; and a long stretch without
a serious accident breeds complacency -- people forget to be
afraid.
The centerpiece of Hayward's new approach was a sweeping
plan called the Operating Management System, known as OMS.
Even today Hayward calls OMS "my most long-standing
legacy." On paper it had much to recommend it. In much the
same way as Exxon successfully did 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 was a massive undertaking that
would take years. Hayward viewed it as a structure that would
identify and correct flaws in the way BP did business
companywide and, ultimately, prevent disasters.
Indeed, it was the OMS system that led BP to identify grave
deficiencies in its Gulf of Mexico operations. 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 they have become too
complicated and cumbersome to effectively manage." One chart
pointed out that a failure to address the issues could result in
"multiple injuries/fatalities," "major environmental damage,"

20. "catastrophic loss of the facility," and "damage to corporate
reputation." In January 2010, BP's 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 because OMS 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 for guiding decisions during
operations.
Perhaps the best proof that OMS wasn't solving BP's process-
safety problems: The company continued to run into trouble --
precisely where it was under the most scrutiny and had the most
incentive 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 refinery violations from
June 2007 to February 2010, according to the Center for Public
Integrity. The rest of the industry combined had 33.) There had
been three more deaths at Texas City since the 2005 explosion.
The chairman of the federal Chemical Safety Board called the
record OSHA fine evidence that BP had "yet to achieve an
effective safety culture." He noted that the company had failed
to comply with a "particularly important" CSB recommendation
to appoint a process-safety expert to its board.
The world didn't seem to care. By 2010, Texas City and the
Thunder Horse platform were back in full production, and
Hayward's cost cuts had taken hold. The company had become
more profitable than Shell, and its dividend and stock were
rising. Investors and analysts loved Hayward. And by the
traditional metrics of personal safety -- worker injuries -- BP
was headed toward its best year ever. "We continue to show our
ability to take on and manage risk, doing the difficult things
that others either can't do or choose not to do," Hayward
declared in February in BP's annual report.
It had been two decades since the last big oil spill in the Gulf of

21. Mexico. President Obama judged operations so safe that on
April 2, 2010, he announced plans to lift the 26-year ban on
drilling off the East Coast. "It turns out," he declared, "that oil
rigs today generally don't cause spills."
April 20 "What is that?"
Tuesday, April 20, was crew-change day. Among those
converging on the Deepwater Horizon was Curt Kuchta, one of
the rig's captains. He flew in from his Maryland home the
previous night, slept in a hotel near the New Orleans airport,
woke up at 7 a.m. to catch the crew bus, and boarded a
helicopter in Houma, La., for the one-hour flight to the rig. A
long commute, to be sure, but not unique. That's a big part of
the appeal, for some, of 21 days on, 21 days off. You get to live
wherever, as long as you're willing to work wherever.
No sooner had Kuchta landed on the rig and assumed command
than he was back up on the helipad to greet an arriving party of
VIPs. Two executives from BP and two from Transocean were
out for an overnight visit. A recent audit of the Horizon's
"safety culture" had suggested that management needed to do a
better job bridging the "disconnect between the top boys and the
rig." The VIPs had also come to recognize a remarkable
achievement: seven years without a lost-time incident on the
Deepwater Horizon.
As it happens, nothing about the Deepwater Horizon's current
project, Macondo No. 1, had gone smoothly. The Horizon wasn't
even supposed to drill this well. Transocean's Marianas rig was
knocked out of commission in November 2009 by Hurricane
Ida. So the Horizon took over in early 2010 -- and quickly
encountered problems of its own. On March 8, two miles below
the ocean 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 when drilling
mud seeps through cracks in the wellbore, and "kicks," which
signal unexpected gas pressure entering the well. All costly, all
time-consuming, all potentially dangerous. Once viewed as a
run-of-the-mill project, Macondo had fallen 45 days behind

22. schedule and $58 million over budget. 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 -- those failures that, while tolerable
individually, are potentially cataclysmic when aligned -- were
accumulating. The final well design called for 21 centralizers to
correctly position the casing (the carbon-steel lining inside the
drill hole) so the cement could provide a good seal. BP didn't
have that many centralizers on the rig and ordered more. But
when they arrived, they appeared to be the wrong kind. Using
too few, BP contractor Halliburton (HAL) warned, could result
in a "severe gas flow problem." But facing delays and added
costs, BP went with the six centralizers it had on hand. "Who
cares," BP drilling engineer Brett Cocales wrote from Houston
to a colleague aboard the Horizon. "It's done, end of story, will
probably be fine."
Then another slice of Swiss cheese: Halliburton, whose late
founder Erle Halliburton was memorialized in the book Genius
With Cement, prepared a foamed mixture that failed multiple
tests in Halliburton's own labs -- results that BP may never have
seen. BP, for its part, never verified the cement was reliable.
Yet another slice: After the cementing work was done, BP
elected not to conduct a planned test on it, which would have
meant more delays. Experts from Schlumberger (SLB) who had
flown out 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 would
tell the crew whether it was safe to finish displacing heavy
drilling mud inside the casing with lighter seawater, set the top
cement plug, disconnect the drilling pipe, and move on -- a
process known as temporary abandonment. Once that was
accomplished, BP would send a production platform to begin
drawing oil from the well.
The negative test almost didn't happen. Jimmy Harrell,

23. Transocean's white-haired senior drilling officer -- a father
figure to many of the men -- was surprised to see no mention of
it in BP's daily work 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 was the final arbiter on all drilling decisions. But in
this case, especially after all that had happened already, 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, "that these
changes went through any sort of formal risk assessment or
management of change process." More Swiss cheese.
Around 5 p.m., Halliburton's Ryan Haire began the negative-
pressure test. He opened a direct line into the drill pipe and bled
off pressure. As the pressure dropped, fluid began rising in the
well, collecting in twin 10-barrel measuring tanks. Some flow
was to be expected, but not this much. Before long, Haire called
the drilling floor: "My tanks are full," he said. "I'll have to shut
the well in."
Once shut, the pressure in the well began to climb again. Both
the pressure increase and the rising fluids clearly indicated that
somewhere hydrocarbons were invading the well. The crew tried
the test twice more and got similar results. Up on the drilling
floor, the decision-makers were puzzled. BP (unlike, say, Exxon
Mobil) had no established procedure for conducting this test --
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." A discussion ensued. The explanation --
which investigators would later dismiss as impossible -- was
accepted. Nobody bothered to consult with safety experts on
shore.
BP's Donald Vidrine ordered the crew to perform the test yet
again, this time on a side channel into the drill pipe called a
"kill line." In theory, since the kill line and drill pipe are parts

24. of a closed system, tests on each line should generate identical
results. But this time the well passed the test: No fluid and no
pressure buildup. (Investigators would later theorize that the
kill line was clogged.) Deciding that one successful test in the
kill line was more telling than three failed tests 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 its spotless 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 impressive place, especially after dark, all
glowing screens and blinking lights. They ended up at the
dynamic positioning simulator, a training device that played
like a videogame, designed to mimic extreme conditions that
could knock the rig off the well. They were having fun. But the
game was about to end.
Later, analysis of real-time data would pinpoint early signs of a
pressure "imbalance" deep in the well at 6:52 p.m. Meaning that
for the past couple of hours -- slowly at first, gradually growing
in force and velocity -- hydrocarbons had been surging toward
the surface. Yet the crew members 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 Horizon's chief electronics technician, was
on the phone with his wife when he heard what he would later
describe as "a hissing noise and a thump." He told her he had to
hang up.
Ship's engine No. 3 began revving uncontrollably. Light bulbs
popped. Computer monitors shattered. The rig went dark. The
first explosion blew Williams clear across the room. The second
knocked him another 35 feet. Blinded by blood from a gash in
his head, gagging on carbon dioxide, and dragging an injured

25. 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
of bed, standing barefoot in his skivvies, trying to get his
bearings. The air was thick with smoke. That's odd, Lindner
thought: He could see his buddy, Ryan Haire, there on the other
side of what used to be a wall. He heard Yancy Keplinger on the
ship's intercom, yelling "Fire! Fire! Fire! This is not a drill!" He
reached for some clothes. "I thought I should die with some
pants on," he later told Fortune.
Crew members gathered at the two forward lifeboats (the two in
the rear were blocked by flames). Muster leaders with
clipboards checked off names, trying to get an accurate count,
but everyone could see it was hopeless: Some crew members
had already jumped. After what seemed like an interminable
delay, both boats launched, leaving a handful of people behind.
For them, 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. But Wheeler's helpers couldn't load
the stretcher onto the raft, now dangling over the edge of the
deck. Flames were approaching. The heat was almost
unbearable. Little explosions were erupting all around them.
Finally, chief engineer Steve Bertone managed to shove the
gurney into the life raft and follow.
Captain Kuchta didn't board the raft. He jumped. So did
Williams. "There was so much heat coming up, I thought for
sure the life raft was going to pop or melt," Williams later told
investigators, "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 no more dying that night. That
part was over. Wheeler, like all the injured, would survive. But
10 of their fellow crew members had been consumed by flames
on the drilling floor. Another had fallen from the starboard

26. crane. He was last seen lying face down on the deck in a pool of
blood by a co-worker who checked for a pulse, detected none,
and fled.
April 20 The sea is burning
Louis Langlois and Anthony Gervasio, the Mutt-and-Jeff team
on the Damon Bankston, saw the jumpers. Seconds after
receiving the order from Captain Landry to go, they were in the
Bankston's rescue boat, motoring toward the burning rig.
On the first sweep Langlois and Gervasio delivered four
jumpers to the Bankston, then headed out again, searching for
more. The Horizon's forward lifeboats were descending. By now
the sea itself was burning.
High overhead, hanging from the main deck of the Horizon like
a big orange spider on a tendril of silk, was the raft, cocked at a
crazy angle. As it came down, Horizon crew members were
splashing into the sea beside it.
Langlois and Gervasio pulled five people out of the water,
including Williams, still bleeding heavily. The life raft,
meanwhile, was sitting right up under the edge of the rig, and it
wasn't moving. Overhead a two-inch gas overflow pipe emptied
beneath the main deck. It was spitting flame like an upside-
down torch, laying down a puddle of fire on the water and
roaring so loudly that the rescuers, five feet apart, could barely
hear each other's shouts.
They nudged the rescue craft in closer. Seven or eight people
were in the water, trying to pull the 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 wouldn't budge. The painter, a white rope, was still
tied to the rig. It had a weak link -- a node that's supposed to
pop under 10 pounds of force -- but for some reason it wasn't
popping. Gervasio gunned the throttle. The painter grew taut,
but didn't break.
Luckily, Langlois had a knife, a six-inch folding Buck. He
passed it to Kuchta, who swam back and cut the painter,
severing the last connection to the burning rig.

27. The scene aboard the Bankston was "controlled chaos," as
Captain Landry would later describe it. 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 the top of the Bankston's rope
ladder. As each stunned Horizon crew member clambered
aboard, he turned and loitered, peering over the side to see who
was coming up next -- who had made it and who had not.
The first headcount came up 15 short. Then 11, then 11 again,
and that's where it settled. Officially the search and rescue
mission continued for four days. But none among the dazed and
disbelieving survivors standing in clusters on the Bankston's
main deck -- some of them still in their underwear, some crying,
most simply staring fixedly across the water at the howling pyre
they'd just escaped -- had any illusions about the fate of their
missing comrades. "I don't know what I'm 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 miles per hour, to begin
carrying off the seriously injured.
Not until 8:13 the following morning did the Bankston depart
the scene. Normally it's a 12- to 14-hour trip to Port Fourchon.
But the Bankston had to make a couple of out-of-the-way stops
at other rigs: first to take on two medics and drop off four
Horizon crew members, who would try to activate the rig's
blowout preventer remotely; and second to board a contingent
of company lawyers (for the Bankston's owner, Tidewater
Marine) and government investigators who had helicoptered out
from the mainland to begin taking statements.
At 1:27 a.m. on Thursday, April 22, the Bankston finally
arrived at C-port, slip No. 1, in Port Fourchon. Waiting at the
dock was a line of Porta Potties. It had been 27 hours since the
explosion -- not too late to test for alcohol and drugs. Also
waiting were white buses that would carry them all to a hotel in
Kenner, 90 minutes north. There they were released to their
loved ones -- and a world waiting to hear what had happened.

28. "I'd like my life back."
"We've got a big problem in the Gulf of Mexico." Everyone at
BP remembers how they got the news. For Tony Hayward, it
arrived in a voicemail at 7:24 a.m. London time -- almost four
hours after 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.
BP's top executives gathered in a war room at their London
headquarters, staring at CNN. The blazing rig looked like "a big
Roman candle," Hayward recalls. Boats were pouring water onto
its deck. "Christ," Hayward told Inglis, "if we keep going like
this, the bloody thing's going to sink!"
Orders soon went out to the boats spraying the Horizon: They
should lower their water cannons to the rig's legs. As long as
the Horizon stayed afloat, the gusher of hydrocarbons remained
contained, traveling up through the mile-long riser pipe and
fueling the inferno atop the rig. BP and Transocean launched a
desperate effort to trigger the blowout preventer and shut off
the well before that changed.
All such efforts, of course, would fail. After burning for 36
hours, the Deepwater Horizon sank at 10:22 a.m. on April 22.
Hayward arrived at BP's U.S. headquarters in Houston in time
to get the bad news: Macondo No. 1 was gushing crude.
An interview with Tony Hayword after the first day is
interesting. Makes one wonder if he should have done the
interview. https://www.youtube.com/watch?v=hDVVfDTR2kw
This was a problem for which BP and its CEO were utterly
unprepared. No one had ever tried to seal a hemorrhaging well a
mile underwater -- or wrestled with an environmental crisis in
the hothouse of the 24-hour news cycle. In Houston, Hayward
took charge of the company's response on both the operational
and PR fronts.
Looking back at the 87 days it took to stop the flow of oil, it's
hard to fault what BP actually did -- in struggling to cap the
well, keep oil from reaching shore, clean the fouled beaches,

29. and committing to pay the economically injured. Because BP
held the Macondo lease, U.S. law required it to pay all cleanup
costs. But Hayward never sought to hide behind a cap passed
after the Exxon Valdez accident, limiting damages for oil spills
to $75 million. Indeed, BP will pay far more, far more quickly,
to far more people than the company would have ever had to
pay in the U.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.
BP's public strategy, on the other hand, was its own disaster. It
overshadowed BP's response, added billions to its tab, cost
Hayward his job, and even jeopardized the oil giant's survival.
"What the hell did we do to deserve this?" Hayward asked
colleagues shortly after the explosion. The comment perfectly
captured his perspective: BP hadn't done anything wrong.
Hayward downplayed the size and significance of the spill and
minimized BP's role. "It wasn't our accident," he said, blaming
both Transocean and the "unprecedented" failure of the rig's
blowout preventer.
BP repeatedly raised expectations that it would soon end the
crisis. A tipping point came five weeks in, when its "top
kill/junk shot" failed -- after Hayward had predicted a 60% to
70% chance of success. Says a senior company executive, the
message was clear: "Don't trust BP. They don't know what the
fuck they're doing."
Hayward made matters worse, attaining infamy when he vented
his own frustration. He'd been in the U.S. for weeks. He and his
family had received death threats. His wife (who had joined a
Facebook 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 struggling Americans. "We're sorry,"
Hayward replied to the cameras in Venice, La. "We're sorry for
the massive disruption it's caused to their lives." Then,
sounding annoyed: "And you know, there's no one who wants

30. this thing over more than I do. I'd like my life back."
By June the situation had mushroomed into a national rage.
President Obama told NBC he was seeking advice on "whose ass
to kick." Congress began drafting proposals to bar BP from U.S.
waters. The company's stock dropped 48%, wiping out $91
billion in market value.
This was generating what BP's current CEO, Bob Dudley,
describes as a "near-death" experience. BP, which funded its
working capital needs with about $10 billion in short-term
paper, found itself shut out of the overnight markets. Trading
partners shunned the company. A liquidity crisis loomed.
Hayward says he directed his financial team to shore up the
business with fresh bank lines, to make BP "bulletproof." He
adds: "If we hadn't dealt with it in a very draconian 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
establish a $20 billion escrow fund to pay damage claims. To
preserve cash, the company would suspend its 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 first quarter of
2010. Obama also promised to end his market-rattling assault,
telling the world, "BP is 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 powerful government in the world."
The next day Hayward appeared before a congressional
subcommittee, where lawmakers took turns berating him. He
then flew home for a break -- and a final PR disaster. Hayward
was photographed in a yacht race off the Isle of Wight, sailing
with his son in the spill-free English waters. Said White House
Chief of Staff Rahm Emanuel mockingly: "He's got his life
back."

31. "Systematic failures … in the entire industry"
BP finally stopped the leak on July 15 and permanently sealed
Macondo by cementing it shut three weeks later. By this point,
trust in BP had sunk so low that it had to spend an extra $2
billion until the well could be sealed from the bottom after it
had already been closed from the top. Hayward, meanwhile, was
history. BP had named Mississippi native Bob Dudley as its
first American CEO, effective Oct. 1.
As the other investigations dragged on, BP was quick to offer
its own judgment. In a 192-page report released last fall, the
company admitted oversight mistakes but placed most of the
blame on its contractors, especially Transocean and Halliburton.
Dismissing widespread criticism of its well design as irrelevant,
BP cited the flawed cement work, concluding that it had
allowed gas to enter the well through the bottom; the botched
negative-pressure test; the rig crew's failure to respond to signs
of trouble; and the impotence of the blowout preventer. BP's
conclusion was that the Horizon was an industry accident, with
lessons for all, not an indictment of its own practices.
In truth, any fair reckoning of responsibility places BP at the
top of the list. Its contractors made critical mistakes. But at
virtually every step, BP made decisions that increased risk and
displayed a lack of oversight and operational discipline. All
were failures in process safety -- and all saved the company
time and money. As the presidential commission noted, BP's
record suggests "its approach to managing safety has been on
individual worker occupational safety but not on process safety.
These incidents and subsequent analyses indicate that the
company does not have consistent and reliable risk-management
processes -- and thus has been unable to meet its professed
commitment to safety."
That said, it's also perilous to assume that BP stands alone. The
offshore-drilling industry has experienced a chilling array of
accidents in the past decade -- fires, blowouts, oil spills, and
close calls -- including 20 in the gulf. As the presidential
commission observed, "The Macondo well blowout can be

32. traced to a series of identifiable mistakes made by BP,
Halliburton, and Transocean that reveal such systematic failures
in risk management that they place in doubt the safety culture of
the entire industry."
Today the Gulf of Mexico is back open for business. Beaches
are largely clean, the vast majority of its fishing waters no
longer off limits. The oil has receded from view -- thanks in
good part to the gulf's warm natural ecosystem, filled with
bacteria that rapidly consume oil. But the lasting environmental
impact remains uncertain. A recent Audubon Society report
called it "the largest uncontrolled science experiment in our
country."
Dudley has announced a major reorganization, aimed at averting
yet another disaster. He created a new safety division with
broad powers to intervene in company operations. And BP
finally appointed a board member with expertise in process
safety.
A visit with BP's new CEO
Fortune met with Dudley at BP's London headquarters in
November. Dudley is more careful with his words than
Hayward, the personification of likable calm. But though his
tone and accent are different, the substance of his message is
eerily familiar.
Dudley says that what happened in the gulf is "complicated --
there's multiple causes." He says, "I do not believe that BP is an
unsafe company," but acknowledges, "We clearly now have to
go one more step in terms of putting in place another
organization that will have checks and balances over our line
organization." Rather than "just run from" risk, as he puts it,
"we want to do 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 this Macondo incident," he says
without irony, "2009 was the best year we'd had, and 2010 was
also heading in that direction." Spoken like a true BP man.

33. By Peter Elkind and David Whitford with Doris Burke
· A technical link by USCSB details the exact cause and effect
of the explosion. Better suited for those in the energy industry.
The video is about 11 minutes long and done quite well.
However, this is not testable material, it only satisfies curiosity
of some. https://www.youtube.com/watch?v=FCVCOWejlag