BP PLC took another political and stock market pounding as allegations surfaced that the British oil giant took shortcuts that created a “nightmare well” in the Gulf of Mexico, according to internal documents released by U.S. lawmakers investigating the explosion that triggered the U.S.’s worst oil spill.
The comment was made by BP drilling engineer Brian Morel in an e-mail on April 14, six days before an explosion destroyed the Deepwater Horizon offshore drilling rig, killing 11 crew. The e-mail and other documents were released by the U.S. House of Representatives Energy and Commerce Committee, which is investigating the explosion and the spill.
The committee accused BP of making decisions that “posed a trade-off between cost and well safety,” outlining its findings in a 25-page letter to BP CEO Tony Hayward.
The U.S. government is turning up the heat on BP just as President Barack Obama is touring Gulf states affected by the huge spill and preparing a televised address to the nation Tuesday on actions he is taking. Mr. Obama is also set to meet with BP chairman Carl-Henric Svanberg Tuesday, and Mr. Hayward will face questions from the government committee Thursday.
The letter to Mr. Hayward was based on interviews and documents obtained by the committee, led by Democratic chairman Henry Waxman. According to the letter, BP embraced the cheaper of two options for its well design at the Macondo site in the Gulf.
BP chose a single string of steel casing from the sea floor to the bottom of the well, providing two barriers against the flow of gas, according to information provided by an executive from Halliburton, the BP contractor responsible for the well cementing. The company had the option of creating four barriers of protection provided by a more elaborate method. “Time after time, it appears BP made decisions that increased the risk of blowout to save the company time or expense,” Mr. Waxman said in the letter.
The letter said that BP was aware of the risks of the single-casing approach but went ahead anyway, leading to Mr. Morel’s comment that the well “has been a nightmare well which has everyone all over the place.”
The letter contains other allegations about BP shortcuts. For example, BP determined that a cement bond log, a test that determines whether cement has bonded properly to a well casing, wasn’t necessary even though an industry expert said such tests should be standard practice with the well approach used.
BP had no official comment Monday.
Even before the committee released the letter, BP was under enormous political pressure from the White House and U.S. lawmakers to set up a compensation fund for the spill’s victims and suspend dividend payments. As the increasingly damaging allegations come to light, the creation of a compensation fund seems certain.
The White House on Monday said that BP appears willing to set up a fund valued in “the billions of dollars,” according to spokesman Bill Burton, who was speaking to reporters travelling to the Gulf with Mr. Obama aboard Air Force One. BP and the White House, he said, were “working out the particulars,” such as the size of the fund, how it would be administered and the identity of the independent entity that would run it.
The compensation fund could be valued at $20-billion (U.S.), according to some estimates. Standard Chartered Bank has put the total cost of the spill at $40-billion, though most forecasts are lower.
Whether BP will agree to set up a victims’ fund as well as suspend the hefty dividend is still an open question. On Monday, BP’s directors met to mull the dividend’s future. But they are unlikely to make a final decision before Mr. Svanberg meets Mr. Obama.
