Battle of oil titans as BP seeks to shift blame for spill

9th September 2010, Comments 0 comments

BP sought to spread the blame for the Gulf of Mexico oil disaster Wednesday, setting off a battle of oil industry giants with tens of billions of dollars in potential fines and legal liabilities at stake.

The British energy giant released a report concluding that a "sequence of failures" were to blame for the April 20 explosion that killed 11 people and unleashed 4.9 million barrels of oil in the worst-ever maritime spill.

While admitting some mistakes, BP exonerated its well design and apportioned a large share of the blame to faults made by rig owner Transocean and contractor Halliburton, which cemented the well.

The contractors responded by calling the report flawed and self-serving, while also asserting that BP was ultimately responsible for overseeing and approving all work done on its well.

The four-month probe, led by BP's head of safety and operations Mark Bly, is viewed as key to how the firm plans to defend itself in legal proceedings involving the spill.

"This report likely does its job in providing ammo (ammunition) for BP in future court cases, where the avoidance of the charge of 'gross negligence' is critical," said Peter Hutton, an oil market analyst at NCB Stockbrokers.

BP and its investment partners Anadarko and Mitsui are financially responsible for the cleanup costs, fines and compensation for damages. Transocean has also been deemed a "responsible party" by the US government.

That responsibility could shift and fines could skyrocket if BP -- or any of the contractors -- are found to be guilty of gross negligence or willful misconduct.

The oil company said key failings included a "bad cement job" at the bottom of the well that allowed gas and liquids to flow up the production casing.

Additionally, the results of a negative pressure test were incorrectly accepted by BP and Transocean, while the rig's blow-out preventer on the seabed failed to automatically seal the well.

"It is evident that a series of complex events, rather than a single mistake or failure, led to the tragedy," BP's outgoing chief executive Tony Hayward said in a summary of the 200-page report.

Transocean dismissed the report, accusing BP of having designed a "fatally flawed" well and making "cost-saving decisions that increased risk -- in some cases, severely."

"This is a self-serving report that attempts to conceal the critical factor that set the stage for the Macondo incident: BP's fatally flawed well design," said the Swiss-based group.

Halliburton said the report contained "substantial omissions and inaccuracies," while BP was responsible for overseeing and testing complex deepwater operations.

"Halliburton remains confident that all the work it performed with respect to the Macondo well was completed in accordance with BP's specifications for its well construction plan and instructions, and that it is fully indemnified under its contract for any of the allegations contained in the report," the Texas-based company said in a statement.

The US government's pointman on the response welcomed the report as a "piece of information that adds to our understanding."

"But it is not the be-all and end-end all of why it happened and what needs to happen in the future," retired Coast Guard admiral Thad Allen told reporters.

It took 87 days to stem the flow of oil into the sea and hundreds of miles of coastline from Texas to Florida were sullied, killing wildlife and devastating tourism-dependent local economies.

US lawmakers have accused the oil giant of sacrificing safety to improve its profit margin, a practice Hayward denied during hostile congressional grilling in June. He announced he would quit the top job in October.

Under US law, fines could reach 4,300 dollars per barrel spilled, if negligence is proved.

BP could then theoretically face fines of up to 17.6 billion dollars for the 4.1 million barrels that poured into the sea -- another 800,000 barrels were siphoned up to ships.

The leaking Macondo well has now been secured but the disaster is being examined in a string of court cases and probes, including a criminal investigation by the US Department of Justice.

BP has already spent eight billion dollars trying to contain the disaster, an effort it forecast could eventually cost over 32.2 billion dollars.

Ratings agency Fitch meanwhile upgraded BP's credit rating three notches, citing an end to the threat of more leaks from the Macondo well.

The firm's market value slumped by tens of billions of dollars but its stock has recovered somewhat in recent weeks. Following the report's publication, BP shares closed up 1.32 percent.


© 2010 AFP

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