So, It Was Cost Cutting That Led To Oil Spill.

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The Congressional Comittee report on the Gulf Oil Spill shows clearly that BP ignored industry best practices and its own Quality Assurance Plan, to cut time and cost in the Macondo Oil prospect and increased the risk of failure.

What is risk? Risk is no longer an uncertainty, but a definite probability. If it is good it is known as an opportunity, if it is bad it is called a threat. A complex project as a deep sea drilling rig pumping billions of dollars of crude annually from 5000 feet under the sea is an opportunity. Its failure that could cause damage to life, property and environment is a threat. This threat must be countered with adequate risk management initiatives both financial as well as operational.

BP willingly chose to ignore the industry best practices in both cementing of the pipe as well as testing of the well, as per a Congressional enquiry. It first cut cost on the safety aspect by installing a single pipe instead of a double casing that increased the chance of a leak. Then on the 18th of April, Halliburton the cementing contractor advised BP to install a number of devices to make sure that the pipe was properly centred, so that small cracks did not develop in the cement and cause gas leakage. BP chose to cut cost once again, and installed 6 devices out of the 21 recommended.

Further BP did not circulate the mud thoroughly through the pipe as is the common industry practice, an operation which normally takes 12 hours, but took BP only 30 minutes. The clinching piece of evidence of negligence by BP which will probably be the cornerstone of the criminal investigations that have been now initiated against the oil giant, is its sending back of experts from Schlumberger who had arrived ready to do a critical run of integrity tests on the pipe on the morning of 20th April after the last of the cement was pumped into the well. Thus in an attempt to cut costs and time, BP neglected the well laid out procedure for prevention of risk threat to the 5000 feet underwater pipeline.

Twelve hours later, the blowout occurred, causing the greatest oil spill in the history. After neglecting risk prevention procedures, BP was guilty of inadequate risk mitigation that was unable to contain the damage and resulted in the explosion of the rig. Further prevention of risk escalation norms were flouted when BP started pumping back cement at twice the pressure into the Valve head or BOP in the top drill operation. It was fortunate that valves located in the BOP did not leak or burst and cause much greater quantity of oil to flow into the Gulf water.

The Obama Government surprisingly fell for BP’s smooth talk of ‘Trust us’ and did not take charge of the situation initially. In such cases BP should have first released its engineering drawings for wider consultation and then, simulated conditions in its Houston control rooms with pressurised tanks and a miniature BOP created to pre-test its efforts to contain the leak. The Obama Government could have possibly brought in top maintenance experts from other deep drilling companies to create a salvage task force for the operation instead of relying on coast guard administrators and academics from universities to merely advise BP. Even today BP's attempts to arrest the spill is not technically sound though looks extremely high tech due to BP's massive PR excercise.

With many deep drilling projects in the anvil all over the world by both by home grown companies as well as foreign multinationals, it is time that all the Governments take an initiative to involve the drillers, the marine life experts and other stakeholders and create a best practices code for operational risk management of such projects. Transparency must be ensured in operational risk procedures as the stakes are high, and oil majors like BP bribe regulators like MMS and cut corners to increase profit at all costs.