YESTERDAY BP was preparing to begin an operation that it hoped would at last bring a long-term solution to its oil spill in the Gulf of Mexico, by far the largest in US waters.
Experts believed the so-called “static kill”, which uses heavy mud to force oil back into the reservoir before sealing it with cement, had a good chance of success. BP will not be confident that the well is permanently sealed until a “relief well” is drilled into the bottom of it to allow more cement to be pumped in. Yet even after the well is plugged, the spill will remain a threat to BP for many years to come. Stopping the leak marks only the end of the beginning of the crisis.
The task facing BP includes cleaning up the remaining oil in the water and on the coast; determining the cause of the accident; paying compensation; defending itself against claims for punitive damages; restructuring its exploration and production division; stabilising its finances; raising its safety standards; and earning the right to continue operating in the US.
As BP seeks to secure its future, a diverse cast of characters will be crucial in determining its fate. The group includes politicians, lawyers, lobbyists, executives, oil rig workers and even a small contingent of animals.
Some have themselves been tarred by the biggest spill in US history, while others have seen their profiles raised by their responses to the crisis.
For Bob Dudley, the newly appointed chief executive who will take over from Tony Hayward on October 1st, it is a daunting challenge. The protests now erupting over BP’s plans for deep-water drilling off the coast of Libya and west of the Shetland islands show how suspicion of the company is in no way confined to America.
The two greatest threats to BP, though, are in the US. First, there is the risk that once the full details of the accident on the Deepwater Horizon rig on April 20th are known, BP could face claims for gross negligence, which would increase the potential fines and damages it might face.
BP believes it can refute any such charge. But if it fails, the cost of the spill – now estimated by the company at $32bn – could rise by tens of billions of dollars.
Second, there is the political threat to BP’s position in the US as a result of legislation now in Congress, which could bar companies from offshore drilling leases if they have had a poor safety record over the previous seven years. That would make it very hard for BP to sustain and develop its position in the Gulf of Mexico, which it had hoped would be one of its key areas for future growth.
New voices may well emerge as the investigations and lawsuits progress. But these are likely to be the central figures in determining whether BP, once the world’s second-largest oil company by market capitalisation, can survive the threat of takeover.
– (Copyright The Financial Times Limited 2010)