By Paul Garrett
That the BP Gulf of Mexico oil spill is an environmental disaster is not in dispute. But the root cause of it and the political fallout – as Prime Minister David Cameron heads to Washington for a summit with President Obama, is worthy of analysis.
Issue one – in an increasingly low carbon orientated world, the US is still addicted to oil. That is why it is betting the farm on importing tar sands from Canada and deep water drilling in the Gulf of Mexico – both strategies which carry a huge environmental premium.
Issue two – drilling in the US requires a US partner – hence ‘British Petroleum’, as President Obama insists on calling it, needed US sub-contractors, including Halliburton, who were actually the hands on managers of the Gulf rigs.
Issue three – all outsourcing deals have as part of their fatal flaw the need to cut costs. Cutting costs means that safety margins can be compromised.
So to the fall guy – Tony Hayward. Conveniently, from the US media’s point of view, a Brit . And as far from the Dallas J R Ewing swaggering oil man as you could imagine.
A soft-spoken, intelligent geologist, he is certainly no PR man. Saying ‘I want my life back’ after eleven of his contractors lost their lives when the Gulf rig exploded will go down as one of the greatest PR gaffes of all time along with Mr ‘my products are crap’ Ratner.
Hayward also has other facets you might not expect from an ‘oil man’. He believes, for example that markets cannot always deliver energy policy and that sometimes government intervention is required. That is not only ‘man bites dog’ in the world of oil, but intelligent too given that markets have proved themselves to be flawed in a number of ways since 2008.
That Hayward will be sacrificed along with his chairman as the Gulf leak is finally capped is beyond doubt. That he will be handsomely compensated is also clear. But the real casualty will be BP as an independent entity. Obama will facilitate a takeover of Britain’s biggest company by an American oil major, probably ExxonMobil. David Cameron in Washington this week will be unable to stop this.
The implications for thousands of UK pensioners reliant on a viable and independent BP ? Who knows?
But ultimately UK Plc will be the loser – not just the shrimp fishermen of Louisiana.
Now BP’s woes are piling up at the highest possible level. At the first Washington Summit between US President Barack Obama and British Coalition Prime Minister David Cameron, BP, by all accounts was number one and two on the list of issues the Americans wanted to raise.
The Gulf of Mexico oil spill was unsurprisingly brought up, and Cameron pledged that BP would do the right thing in terms of covering the cost of the spill (although since it is a private company that is somewhat beyond his gift).
But Cameron was put under pressure from Obama, and later a group of Senators , over the premature release of the Lockerbie bomber Abdelbaset al-Megrahi a year ago to his native Libya. This was done on humanitarian grounds by the Scottish Government, so was technically beyond Cameron’s jurisdiction and not on his watch.
But crucially, BP was lobbying at the time of Megrahi’s release last year for a ‘prisoner exchange’ rapprochement with Libya, while also negotiating for £550 million of Libyan offshore oil exploration rights.
The Americans smell a rat. Cameron says the decision to release the Lockerbie bomber was wrong, and sees no need for an inquiry after the event, but this latest development puts BP on the ropes. Rarely has a company been linked, albeit unproven, with the release of a convicted terrorist.
This story is not over yet. Meanwhile the many people whose pensions are dependent on a healthy BP share price should be very worried indeed.
Paul Garrett is a journalist, commentator and analyst who has been covering the European energy and water sectors for the past thirty years. After managing the UK water industry trade association's press office during privatisation, he launched and then edited Utility Week magazine for ten years, then worked in a utilities advisory capacity for international consultancy Accenture for four years. He now contributes to a number of sector magazines.
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