BP CEO Tony Hayward thinks that his company's response to the Gulf Disaster has been "extraordinarily successful," and spoke of how winning the "hearts and minds of the communities and impacted" could "enhance our reputation rather than have it damaged," Forbes said Tuesday in an article entitled "After the Spill: Big Oil Plots Its Comeback."[1]  --  Reporter Christopher Helman suggested he is "delusional."  --  "Given the latest comeuppance, you might expect a little more humility from Hayward," he said.  "Nothing doing." ...




by Christopher Herman

** BP Chief Tony Hayward thinks the Gulf spill might help the oil industry. Could he be right? **


May 18, 2010


Despite the death threats, BP Chief Executive Tony Hayward says he's sleeping well these days.  He looks it:  fresh, almost relaxed in his makeshift corner office at BP's emergency response center in Houston.  He insists the company has been "extraordinarily successful" in its response to the spill, which so far has dumped more than 100,000 barrels of oil into the Gulf of Mexico since Apr. 20, threatening tourism and fishing from Florida to Texas.  By mid-May 13,000 workers and 500 vessels were trying to contain the giant leak.  Leaning back in his chair, Hayward compares the operation to D-day.  He quotes Winston Churchill:  "When in hell, keep going."

Not that he has a choice.  Before the first failed effort to cap the petro geyser BP faced an ocean of problems.  A group of 200 plaintiffs' attorneys met in New Orleans on May 6 to join forces in suing the company.  Senator Barbara Boxer (D-CA) called for a permanent drilling ban off the West Coast.  BP's shares took a deep dive, dropping $25 billion, despite $6 billion in first-quarter earnings, double the results of a year ago.

Hayward gropes for an upside.  "Deepwater drilling will be transformed by this event," he says.  "If we can win the hearts and minds of the communities that are impacted, then we have the potential to enhance our reputation rather than have it damaged."

Delusional?  Experts agree the industry will change in the wake of the disaster.  "Regulations have not kept up with technological change," says Beverly Sauer, professor at Georgetown's McDonough School of Business.  She sees it swinging back.  For 20 years the oil industry has pushed farther offshore, drilling 14,000 wells in water depths of more than 700 feet, into ever trickier reservoirs, with higher pressures and temperatures (and very few serious accidents).  Something bad was bound to happen.

Yet, despite the environmental damage this spill continues to cause, offshore drilling will not go away -- just as Exxon's Valdez disaster hardly stopped the shipping of oil by sea.  The deep water (2,000 feet or more) gives up 1 million barrels per day from the Gulf of Mexico, 20% of U.S. oil output.  By 2015 it could rise to 30%, reports IHS-CERA.

If there's any upside, it's that the industry's best talents are working together.  At BP's response center, 470 engineers and managers from 70 companies, including ExxonMobil, Shell, Chevron, and Petrobras, as well as government agencies, work 12-hour shifts around the clock.  One room monitors marine traffic around the spill site; others are dedicated to plugging the hole by several means known as Top Hat, Junk Shot, Top Kill.  Maps and schematics are on every wall; ideas and action items line each whiteboard.  In one darkened room a wall-size screen shows video from the robotic submarines prowling the wreckage; as a worker on a ship changes out tools on the submarine's robotic arms, an engineer talks to him, watching him live.  Food is constantly replenished; masseuses give backrubs.

The Gulf Coast was already reasonably well prepared for a calamity.  Within 24 hours there were 32 response vessels, 1 million feet of containment boom and six firefighting ships on the scene.  The industry promises to get even better.  New redundancies for blowout preventers will be mandated by law, including radio-operated valves.  Drilling contractors will see greater government oversight -- as well as a more muscular U.S. Minerals Management Service -- perhaps even over standardized techniques for casing and cementing ultrahigh-pressure wells.  Already, BP has implemented more expansive testing for blowout preventers at all its deepwater sites, and Hayward promises more intense scrutiny of contractors like Transocean (which, sources say, BP will likely sue for gross negligence).

But push Hayward -- or officials at other oil companies -- for specifics and they say it's too soon to tell, since they still don't know what went wrong with the Deepwater Horizon.  They also fear going public with plans to change standard operating procedure because that might imply bad practices in the past -- catnip to regulators and lawyers.

With 40 new deepwater wells being drilled in the Gulf at $100 million a pop, the world "needs to come to the realization that this is an isolated incident," says Matthew Beeby, analyst at Global Hunter Securities.  Though the Department of the Interior put a temporary ban on starting new wells until May 28, "a longer-term limit on deepwater wells would be ridiculous," says Beeby, and would cause immediate financial pain for Transocean's rivals like Ensco, Noble, and Diamond Offshore.

Georgetown's Sauer says the real problem is that BP and its partners thought they had risk under control -- the way Wall Street's bankers did.  "A fire alarm in the kitchen is not just a call to dinner," she says.  To fix this collective failure of markets and government, we need a public-private partnership to ensure that enough ships, booms, and dispersants are at the ready wherever drilling is under way.  Hayward doesn't disagree:  "Good new regulation should introduce subsea response capability, require greater redundancy in safety systems and focus on risk reduction."

Hayward, 52, has been with BP since 1982, served as Sir John Browne's right-hand man and became head of exploration and production before taking over in 2007 from Browne, who was felled by personal scandal following the catastrophic refinery explosion in Texas City in 2005 and the Prudhoe Bay pipeline spill a year later.  Given the latest comeuppance, you might expect a little more humility from Hayward.  Nothing doing.  "The company is much better able to sustain this sort of incident than it could possibly have been able to three years ago."

His legacy, he knows, will be defined by the spill -- and how quickly it's contained and cleaned up.  "I'm not interested in being an iconic CEO," he says.  "Once things turn around I will disappear again."  For a lot of people, particularly in the Gulf, that can't happen fast enough.