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At BP, a history of boldness and costly blunders

Hurricane Dennis had already come and gone on July 11, 2005, when a passing ship spotted a shocking sight in the Gulf of Mexico: Thunder Horse, BP's hulking $1 billion oil platform, was listing precariously, looking for all the world as if it were about to sink.

Towering 15 stories above the water's surface, Thunder Horse was meant to be the company's crowning glory, the embodiment of its bold gamble to outpace its competitors in finding and exploiting the vast reserves of oil beneath the waters of the gulf.

Instead, the rig, which was supposed to produce about 20 percent of the gulf's oil output, became a symbol of BP's hubris. A valve installed backward had caused the vessel to flood during the hurricane, jeopardizing the project before any oil had been pumped. Other problems, discovered later, included a welding job so shoddy that it left underwater pipelines full of cracks.

"It could have been catastrophic," said Gordon A. Aaker Jr., a senior engineering consultant on the project. "You would have lost a lot of oil a mile down before you would have even known. It could have been a hell of a spill — much like the Deepwater Horizon."

The problems at Thunder Horse were not an anomaly, but a warning that BP was taking too many risks and cutting corners in pursuit of growth and profits, according to analysts and former employees.

"They were very arrogant and proud and in denial," said Steve Arendt, a safety specialist who assisted the panel appointed by BP to investigate the company's refineries after a deadly 2005 explosion at its Texas City, Texas, facility. "It is possible they were fooled by their success."

Indeed, there was a great deal of success to admire. In little more than a decade, BP grew from a middleweight into the industry's second-largest company, behind only Exxon Mobil, with soaring profits, fat dividends and a share price to match.

From its base in London, the company pushed technology to the limit in the remotest reaches of Alaska and the deepest waters of the Gulf of Mexico — "the tough stuff that others cannot or choose not to do," as its chief executive, Tony Hayward, once put it.

The company also led an industry wave of cost-cutting and consolidation. It took over American competitors like Amoco and Atlantic Richfield and eliminated tens of thousands of jobs in several rounds, streamlining management but forcing the company to rely more heavily on outside contractors.

For a long time, BP's strategy seemed to pay off. But on April 20, the nightmare situation occurred: the Deepwater Horizon drilling rig exploded, killing 11 workers and sending millions of gallons of oil gushing into the gulf.

Although the accident is still under investigation, preliminary findings by congressional investigators indicate that BP made a series of decisions that compounded the chances of disaster.

Robert Dudley, the BP board member now in charge of the gulf spill response, denied that the accident reflected a corporate disregard for safety.

"I think we will find that this was an incredibly complicated set of events with individual decisions and equipment failures that led to a very complicated industrial accident," he said.

When Hayward became BP's chief executive in May 2007, he promised to get the company back to basics.

A plain-spoken geologist and longtime company man, Hayward dispensed with the limousine used by his socially prominent predecessor, John Browne.

"BP makes its money by someone, somewhere, every day putting on boots, coveralls, a hard hat and glasses, and going out and turning valves," Hayward said in a speech at Stanford Business School last year. "And we'd sort of lost track of that."

Hayward also pledged to fix the safety problems that contributed to the downfall of his predecessor.

Visitors today see signs at company offices exhorting workers not to walk and carry hot coffee at the same time, to stick to marked walkways in parking lots and to grasp banisters while climbing the stairs.

But American regulators and some members of Congress say the company continues its risky behavior.

Browne's fall from grace began on March 23, 2005, when 15 people died and more than 170 were hurt in America's worst industrial accident in a generation: a huge fire and explosion at Texas City.

"We have never seen a site where the notion 'I could die today' was so real," the Telos Group, a consulting firm hired to examine conditions at the plant, said in a report two months before the accident.

The explosion occurred when a 170-foot tower was being filled with liquid hydrocarbons. Because of poor communication among several workers who had been on 12-hour shifts for more than a month, no one noticed that the tower was filled too high.

The explosion was "caused by organizational and safety deficiencies at all levels of BP," the U.S. Chemical Safety Board concluded.

The government ultimately found more than 300 safety violations, and BP agreed to pay a then record $21 million in fines.

A year later, there was a new calamity: 267,000 gallons of oil leaked from BP's network of pipelines in Prudhoe Bay, Alaska.

Once again, the cause was preventable. Investigators found widespread corrosion in several miles of under-maintained and poorly inspected pipes. BP eventually paid more than $20 million in fines and restitution.

While these two accidents drew most public attention, serious problems were also brewing offshore, at BP's Thunder Horse platform.

The near sinking in 2005 was caused by a shockingly simple mistake: a check valve had been installed backward, and that caused water to flood into the rig during the hurricane.

Had the well been active, the damaged pipes would have caused a major oil spill.

Altogether, the blunders cost BP and its minority partner, Exxon Mobil, hundreds of millions of dollars in repairs and set back production by three years.

Similar carelessness and disregard for safety was evident in BP's decisions at the Deepwater Horizon rig, according to preliminary findings by the House Energy and Commerce Committee. "In effect, it appears that BP repeatedly chose risky procedures in order to reduce costs and save time and made minimal efforts to contain the added risk," wrote Henry A. Waxman, the committee chairman, and Bart Stupak, chairman of its subcommittee on oversight and investigations.

Revisiting Texas City in 2009, inspectors from the Occupational Safety and Health Administration found more than 700 safety violations and proposed a record fine of $87.4 million — topping the earlier record set by BP in the 2005 accident. Most of the penalties, the agency said, were because BP had failed to live up to the previous settlement fully.

BP gets cap on gushing oil well

BP robots attached a new, tighter-fitting cap on top of the gushing oil leak Monday, raising hopes that the crude could be kept from polluting the water for the first time in nearly three months.

Placing the cap on top of the leak was the climax of two days of delicate preparation work and a day of slowly lowering it into position a mile below the sea. The capping project is just a temporary fix, but the oil giant's best hope for containing the spill.

The next unknown is whether the 18-foot-high, 150,000-pound metal stack of pipes and valves will work. BP plans to start tests today, gradually shutting the valves to see if the oil stops or if it starts leaking from another part of the well.

Residents have been skeptical BP can deliver on its promise to control the spill, but the news was still welcome on the coast. Dwayne Touchet, a 44-year-old shrimper from Welsh, La., said he was relieved to hear the cap was on and can only pray that it works. Touchet is working in the Vessels of Opportunity program, where BP employs local boat owners and fisherman out of work because of the spill.

"It's not over, there's still a lot of oil to clean up. We don't know how it will affect it (the water) in the years to come, all we can do is trust in the Lord," he said.

Meanwhile, the Obama administration issued a new moratorium Monday on deepwater offshore drilling that no longer bans operators by depth of water and stresses new evidence of safety concerns, hoping the revised ban will pass muster with the courts after the initial one was rejected.

First lady in Florida

First lady Michelle Obama visited the Florida Panhandle on Monday to shine a spotlight on a tourism industry battered by the oil spill.

She met business and tourism leaders, walked barefoot on a beach and stopped at an ice cream shop.

Obama's plane landed at the new Northwest Florida Beaches International Airport in Panama City, which was built to bring in more tourists and opened in May, just as the number of visitors began dropping due to the spill.

Obama said she came to show the world that not all of the Gulf Coast's beaches were coated with oil.

"People are looking for things to do with their kids this summer and this is a wonderful place to visit," she said.

At BP, a history of boldness and costly blunders 07/13/10 [Last modified: Tuesday, July 13, 2010 8:49am]

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