Spills and Spin: The Inside Story of BP
Random House, 2011
It was over a year ago, in July 2010, that BP capped its Macondo well in the Gulf of Mexico, plugging the leak that had created the world’s largest-ever accidental offshore oil spill, and already the disaster is passing into history.
Most of the oil has gone – evaporated, digested by microbes, or collected by the army of clean-up crews – and most of the gulf coastline where the oil hit is now clear. Tony Hayward, BP’s chief executive at the time of the spill, who was cast as the villain of the drama by the US media, is rebuilding his career at Vallares, the energy investment vehicle that he leads with Nat Rothschild, billionaire scion of the banking family.
In the United States, political pressure on government regulators is focused less on their having failed to prevent the accident and more on their slowness in approving permits for oil companies to drill more deep-water wells, which the industry and many politicians argue is costing jobs and contributing to higher petrol prices.
There is now an extensive body of literature on the spill, from environmentalists’ philippics to a detailed account of how engineers finally sealed the well. In that crowded market, Tom Bergin’s Spills and Spin finds a niche by focusing on the history, leadership and culture of BP to explain why, although the explosion on the Deepwater Horizon rig on April 20, 2010, came as a terrible shock, there was “a distinct sense of déjà vu”.
The definitive account of how and why the disaster happened is still the comprehensive and well-presented report from the US presidential commission, available for free online at www.oilspillcommission.gov. However, Bergin, a highly regarded oil-industry reporter for Reuters, has provided the best assessment yet of how the accident was rooted in the nature of BP, the most swashbuckling of the oil giants, born paradoxically from a conservative nationalised industry.
Although the book flags in its second half, about the spill and its aftermath, there are some illuminating details, including a convincing explanation of why BP did not cap the well more quickly. Bergin’s best chapters are the early ones, setting out the revolution in BP that turned it from a torpid “two pipeline company” in the 1980s, heavily dependent on the North Sea and Alaska, into a lean and aggressive global business.
John Browne, the chief executive until 2007 who was the architect of that transformation, is deftly sketched; Bergin captures his distinctive combination of intellectual brilliance, charisma and personal awkwardness. Hayward, a more down-to-earth character who lacked Browne’s polish, is also evoked well. Bergin highlights early setbacks in his career, in Colombia and Venezuela, which earned him the nickname “Teflon Tony” because he continued to rise in spite of them, and his attempts to put right the weaknesses in BP that he inherited.
A corporate structure was created by Browne, and reformed but not abolished by Hayward, that allowed great autonomy to local managers and rewarded them for hitting financial targets. As Bergin puts it: “Employees still [under Hayward] had incentives to take on ever more risk for the sake of short-term performance.” The result was that when BP took on the challenges of drilling wells in a mile [1.6 kilometres] of water through a mile of rock, it was more exposed than its rivals to the threat of catastrophe.
One telling detail is that while Royal Dutch Shell and ExxonMobil had on-shore systems monitoring their wells 24 hours a day, BP’s centre operated only during office hours. The signs of impending crisis at Macondo became evident shortly before 9.40pm.
As News Corporation provides another unfolding example of corporate self-destruction, there are lessons here about how to prevent a crisis – and handle one – that anyone in business would do well to take in.
Ed Crooks is the Financial Times US industry and energy editor
© Copyright The Financial Times Limited 2011