How fast can he cook a chicken?
- Spills and Spin: The Inside Story of BP by Tom Bergin
Random House, 294 pp, £12.99, July 2011, ISBN 978 1 84794 081 0
- A Hole at the Bottom of the Sea: The Race to Kill the BP Oil Gusher by Joel Achenbach
Simon and Schuster, 276 pp, $25.99, April 2011, ISBN 978 1 4516 2534 9
When crucial pieces of our infrastructure fail, they do so gracelessly, without much warning and in ways that are difficult to anticipate. The job of sifting through the wreckage falls to official investigators, who determine the event’s ‘root causes’ and offer proposals for new safeguards. Their interventions restore our sense of security by placing what happened in a moral framework. The idea that accidents are caused by a few greedy or negligent individuals is more palatable than the alternative, that the guilty parties were doing exactly what was asked of them, blind to any consequences, like an engine that keeps pumping steam after its pipes break.
Extracting petroleum from the earth generates very high economic rewards – more than $2 trillion annually. There are also high costs, human and environmental, which resist measurement in purely economic terms. The combination tends to breed executives who seem to come from an alternate moral universe, one with unusually contingent notions of truth and responsibility. ‘It’s so much easier getting a project running in the developing world,’ a British geologist who had been hired to prospect in China told me: ‘If you lose a man, send a few thousand pounds back to his village and it’s done with.’
Tom Bergin has spent more than a decade immersed in the oil and gas industry, first as an oil broker and later as Reuters’ reporter on the sector. In April 2010, when the Deepwater Horizon blew out in the Gulf of Mexico, spilling almost five million barrels of oil and killing 11 men, he was there to observe the ensuing debacle, and how it played out at the highest levels of BP. The standard account of the spill attributes it to BP’s ruthless cost-cutting and negligent attitude to safety. Bergin sticks to this line, though he also explains exactly how the company’s managers came to institute negligence as corporate policy in the belief that they were serving the interests of shareholders. His attitude to BP’s malfeasance is similar to that of the company’s peers in the oil industry. By presenting the blowout as a low-probability event driven by BP’s singular recklessness, he avoids questions about the safety of deepwater drilling in general and the likelihood of similar accidents occurring in the future. Most of his criticisms of BP’s response to the spill are directed at Tony Hayward’s public relations tactics. At some points he objects to the CEO managing perceptions with untruths; at others he offers advice on how he might have made his deceptions more effective. Overall, he is too much a creature of the industry to see the story of the Gulf spill as a warning about the way the industry sees the world.
Bergin’s account starts in the 1980s with the rise of John Browne, the cosmopolitan striver-turned-mogul who was BP’s chief executive from 1995 until 2007, when a young ex-boyfriend sold the story of their relationship to the Mail on Sunday and Browne resigned. (He has since headed the Browne Review of higher education, which called for the lifting of the cap on tuition fees last October.) The organisation he inherited was loaded with ballast left over from its early days as a monopoly. It looked more like a postcolonial bureaucracy than anything else; there were three tiers of lunch service at its Moorgate headquarters, and executives would greet the afternoon with sherry and martinis. Authority flowed according to a ‘matrix structure’, where each operating unit answered to two layers of supervisors: the executives responsible for their region and department heads in London.
The beginnings of the Deepwater Horizon disaster, Bergin argues, can be found in the reorganisation Browne undertook, applying to BP the leaner management principles he learned at Stanford. The company was divided into ‘strategic business units’, independent companies within the company, each of which could allocate its capital and manage projects as it saw fit. Managers were held to short-term ‘performance contracts’ focusing on high production and low cost. Those who could extract the most oil while spending the least money were rewarded with promotions and bonuses. Promising junior executives were shuffled between posts all over the world, rarely staying anywhere long enough to bother replacing outdated equipment or rusting pipelines. ‘Go to the limit,’ Browne told his managers. ‘If we go too far, we can always pull back later.’
Bergin argues persuasively that such practices amounted to ‘moral hazard’, with BP not quite consciously rewarding the senior employees who engaged in the riskiest behaviour. The cost-cutting continued under Hayward, who trimmed BP of drillers, geologists and other specialists, outsourcing technical tasks to contractors and filling the company’s top ranks with traders who knew how to allocate capital and whip subordinates into meeting the next quarter’s targets. The demands for rapid production and low cost grew even more intense as Hayward instituted ‘stretch targets’ whereby the results achieved by one outperforming business unit were touted as company-wide goals.
Much the same sort of thing has been going on elsewhere, in manufacturing and retail in particular, since the late 1990s, when a new wave of Taylorism swept through management theory. Under the banner of euphemisms like ‘accountability’, workers’ earnings and job security were linked to ever rising performance goals. For a retailer like Wal-Mart, there were few upper limits on efficiency targets – impossible goals could be passed down the chain of command until ambitious managers felt compelled to lock their minimum-wage employees in stores overnight. But oil and gas extraction were a special case. At the bottom of the production chain were the implacable realities of geology, whose limits could not safely be breached. ‘Thus began a continuous effort to go beyond what BP’s own engineers considered physically possible,’ Bergin says of the stretch targets. One of the most important measurements was raw speed – how fast project leaders could get a hole drilled – calculated in ‘days per 10,000 feet of drilling’. It was as though BP’s senior executives in London had sent their workers into a room full of flammable gasoline vapours with a box of matches and a live chicken, offered prizes to whoever could produce a cooked chicken fastest, then handed the workers safety manuals, closed the door and turned their backs.
The Deepwater Horizon blew out on 20 April 2010, while drilling into a tract that BP had named Macondo. Transocean, the drilling contractor, was billing BP $500,000 a day for use of the rig, and the job was 45 days behind schedule. Bergin records the long series of cut corners and ignored warnings leading up to the event: a cheaper ‘long string’ piping system; a surge of gas in early March; a decision to use six piping centralisers (the number on board) instead of 21 (as recommended by the cementing contractor, Halliburton); a design that left only a single cement barrier separating the wellhead from the rig thousands of feet above. Worst of all was the way the cementing was done as the Deepwater Horizon prepared to seal off the completed well. BP personnel ignored an email from Halliburton warning of flaws in the cementing plan, and then misread the results of a pressure test indicating a massive build-up of pressure inside the well. The last warning, a dangerously high reading on a pressure gauge, went unnoticed by the head driller for 40 minutes. Then black drilling mud began spilling out onto the drilling floor, and it was too late.
The Washington Post reporter Joel Achenbach provides a more thorough account of the engineering decisions in the hours before the blowout. Where Bergin draws most of his details on the blowout from the top layer of data – widely publicised hearings and commission reports – Achenbach examines the many public hearings held by the Marine Board of Investigation in New Orleans to ascertain what actually took place on the rig. Among his findings is testimony about a discussion held in the Deepwater Horizon’s drilling room to determine why there were 1400 pounds of pressure in the drill pipe if the cement job had worked and the well was indeed sealed. Just before the blowout several workers on the rig persuaded one another that the pressure was caused by a ‘bladder effect’, when the glaring but inconvenient truth was that the cement job had failed. Three of the men in the drill shack, including the one said to have suggested the bladder effect, would be killed less than 24 hours later in the blowout. Their willingness to explain away the anomalous pressure readings should be remembered alongside Stanley Milgram’s famous electroshock experiments as a case study of the extent to which authority can warp perception.
After the blowout BP behaved like a well-trained Mafioso. At first it denied everything and attempted to pass primary responsibility for the disaster onto Transocean. Then it grudgingly admitted what could not be denied. Finally, when the Federal Reserve had begun to consider the possibility that the company be declared bankrupt, BP tried to bribe the jury, offering billions of dollars to the US public in the hope that it would turn back the tide of mass opinion and be permitted to continue operating in the Gulf of Mexico. Bergin recalls little-known facts from Hayward’s early career to illustrate his casual relationship with the truth. Working under Browne, he exaggerated the size of prospects in Colombia and Venezuela in order to shore up the confidence of investors. But he had no experience of crisis management on the scale demanded by the Gulf spill. BP spent months at the top of a 24-hour news cycle; the smallest untruths were quickly exposed and made much of as the latest developments in an unfolding scandal. Like most oil men, Hayward seemed to feel entitled to the world’s gratitude. ‘Because I am blessed by my good brain,’ Robert Horton, one of Browne’s predecessors, boasted, ‘I tend to get the right answer rather quicker and more often than most people.’ It’s not difficult to imagine Hayward saying something similar. He committed gaffe after gaffe – denying responsibility, grossly underestimating the volume of the spill, raising expectations for a vain attempt to plug the hole with drilling mud known as ‘top kill’, and wishing to have ‘my life back’.
During the crisis it appears that BP saw Bergin as a sympathetic conduit for getting the company’s message out, and even now he expresses chagrin at the abuse the US media heaped on BP’s managers, whom he calls ‘essentially decent people’. Initially, BP estimated that Macondo was releasing a thousand barrels each day, then raised the estimate to 5000. The second figure proved to be about one tenth of the actual flow rate and was dismissed in the US media as another of Hayward’s self-serving lies. Bergin, however, reports that BP’s engineers built the 5000-barrel estimate into their models when attempting to cap the spill. In his analysis, this mistake prolonged the spill by as much as a month, an indication of how unprepared BP was to deal with an accident of this magnitude. The company went into a sort of institutional shock, confusing the lies it was telling the public with its own analysis of the accident.
Public reaction in the US went through several phases. First was the spill’s gradual rise to the top of the headlines, as its scale and apparent intractability became clear. According to the logic that drives American news stories, every tragedy has to have a villain, preferably a foreign villain, and public anger settled on Hayward. For a few weeks it looked as though the drive for vengeance might spread to the whole enterprise of deepwater drilling in the Gulf, until politicians in the state of Louisiana redirected the hostility onto Obama and the supposed inadequacy of the federal government’s response. Billy Nungesser, the local official who led the campaign to blame the president and predicted that the spill would be ‘Obama’s Katrina’, doesn’t appear in Bergin’s book. Two brief mentions are made of Louisiana’s governor, Bobby Jindal, the charismatic Republican born to Indian immigrants who legitimised Nungesser’s anti-federal rhetoric. In Louisiana, where oil gives the people jobs and the government royalties, it was easy to shift the spill narrative away from petroleum v. fish to a more Katrina-like federal v. local script. The oil industry, as Bergin notes, relies on the goodwill of populations whose resources it exploits, a dependency that has made for such strange bedfellows as the Shah of Iran, among many others. Even stranger was the sight of Jindal and Nungesser, two down-home reactionaries, arguing for the interests of multinational corporate elites in the guise of nativist protectionism. This trick was made possible by Obama’s short-lived moratorium on deepwater drilling, which they presented as an insult on a par with the spill itself.
Jindal and Nungesser deserve much of the credit for the fact that the spill, which Obama seemed to be testing as a pivot for the future of oil, didn’t bring about any lasting change in US energy policy. The Mineral Management Service, the agency responsible for overseeing Deepwater Horizon’s drilling plans, was renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, but the conflict between its interests as royalty collector and regulator remains. The moratorium has ended. Obama’s administration appears to be backing the proposed $7 billion extension of the Keystone Pipeline System, which would carry Canadian tar sands oil more than 2100 miles to Texas. The next auction of blocks of deepwater Gulf leases is scheduled for December in New Orleans. BP is expected to be among the bidders.
One reason for the oil and gas industry’s quick comeback in the US was the successful packaging of the blowout as a ‘black swan’, an event of such low probability that it couldn’t have been anticipated. This certainly helped excuse the fact that no one – not BP, Chevron, Exxon or Shell – had a working plan for plugging a blowout as deep as Macondo, which was why BP’s engineers had to design their countermeasures on the hoof. Bergin, too, attempts to quarantine the problem, arguing that the spill would never have happened had BP’s management correctly assessed the long-term interests of profit-seeking shareholders.
More troubling still is the sense one gets not only that no one on the Deepwater Horizon understood the operation of the rig as a whole, but that even after so many hours of scrutiny on the part of both journalists and the government, no one outside the oil industry really understands how a deepwater rig works. The failure to grasp the possibility of system-wide failure might be one in an accelerating series, bookended by the 2008 financial crisis and the Fukushima nuclear meltdown last spring.
‘It seems likely,’ Achenbach writes, ‘that the truth about Macondo will always be clouded by uncertainties, errors, misinformation … much of this is being litigated, ferociously, and that makes it harder to find a consensus on what really happened.’ The oil industry’s authority, like that of the banks, comes from the laity’s dependence on the systems the industries themselves have built and mastered. Even when that mastery breaks down, as it did with the banks, consumers have little choice but to allow the guilty parties back in the control room. Catastrophes give the lie to the illusion that it is a fiduciary relationship. BP was counting on this lack of public understanding when it claimed, in its own report on the blowout, that the event had eight causes, of which BP was partly responsible for one. The president’s commission concluded that the disaster had nine causes, and that BP was responsible for six or seven. And yet BP stands by what it said at the start. The size of the system and the complexity of the data make it possible to argue for a maddeningly wide range of positions, especially when it comes to vague legal notions like ‘negligence’ or ‘responsibility’. Both concepts hinge on proving that one linear narrative is the right one. As the environmental consequences of the spill play out over years, if not decades, BP will probably cobble together data to make it seem that the effects have been negligible. The campaign will resemble the oil and gas industry’s decade-long finessing of the climate change question, but it will be easier. By the time the experts are able to make a full assessment of the spill’s effects, assisted by BP’s $500 million fund for ‘independent research’, the books will long since have been written.