British Petroleum is in hot water, but it’s nothing like what they’ve done to our now 40% oil slicked Gulf. Tony Hayward’s company has lost about 50% of its market capitalization or roughly $90 billion since the rig exploded and the violent gusher of a spill began.
Investors and money managers don’t even want to touch BP’s stock, unless it’s the sell (or short) button. Adding to that the US government has negotiated with BP to limit their liability to $20 billion in an escrow fund apparently designated to help with spill clean-up efforts.
Rumor has it that BP’s own engineers as well as third party firms, such as Schlumberger, knew of the danger and warned the company’s executives only to be repeatedly shot down. Schlumberger apparently even helo’d out its own engineers just prior to the explosion after they were convinced the rig and well were unsafe.
In other disasters like this in the past, such as the Gulf of Mexico spill in 1979, the only “fix” that worked to stop the gushing was to drill at least one relief well. All of the other attempts to cap the well have not only been ineffective, but in some situations, such as the Top Kill attempt, have made the spill worse by widening the tear.
Currently BP is attempting to siphon off tens of thousands of barrels a day so they can burn the oil at sea in an attempt to buy time and slow criticism before they can get in to drill a relief well. The irony is that the amount of oil that is being acknowledged as having spilled on a daily basis is increasing at what seems a parabolic rate and BP is not even preventing as much oil from spilling as they were claiming was first leaking.
The relief well is months away and it may or may not be an effective long term solution. The first problem is that there is a risk that drilling the relief well could damage the well site further, creating a massive breach and significantly increasing the oil spill’s flow rate. The second problem is that the relief well’s rig could also explode or the well itself could collapse at any time.
There is also a high likelihood that BP will not be BP in the next year or so. That is to say that the firm has hired the likes of Goldman Sachs, Blackstone and Credit Suisse to explore the “options” it has moving forward. Maybe they’ll give their assets to the US government for the clean-up effort that is expected to cost in upwards of a trillion dollars. After all, Hayward claimed he does care about the “small people of the world” in another foot in mouth media gaffe.
In the future, should there be one for US offshore drilling, there should be significant safety precautions for all rigs, such as having backup rigs and relief well plans in advance of drilling the initial well. This seems to be the only way to deal with the chance of another disaster expediently.
In summary, it looks like BP’s reckless disregard for safety and lust for easy profits has not only sewn the seeds for a horrifying environmental disaster, but the potential destruction of their company and many British pension funds.
