Business Bookshelf: An analysis of BP’s oil spill

If journalism is the first draft of history, instant books are the second. The presidential commission investigating this year’s oil spill in the Gulf of Mexico is still a couple of months away from delivering its initial report, but already the first books on the world’s largest offshore spill are hitting the shelves.

As the business columnist for the Houston Chronicle, and a BP watcher since the Texas City refinery explosion of 2005, Loren Steffy was in the right place to follow the oil spill close up, and knows enough of the background to set it in the context of BP’s troubled history in the U.S.

His strengths and weaknesses, however, are exactly the ones you would expect from a writer with his perspective. In his new book, “Drowning in Oil: BP and the Reckless Pursuit of Profit,” Steffy is very good on the drama of the accidents, and on the technical details of the hazardous business of offshore oil extraction.

What he fails to do in the book published by McGraw-Hill is get beneath the skin of BP, to anatomize the flaws in the company that lay behind the oil industry’s worst disasters of the 21st Century.

The basic facts, as Steffy sets them out, will be familiar to anyone who has followed the media this year. BP was built from a “staid and stodgy,” formerly state-owned company into a world leader under John Browne, who, Steffy observes, was “something of a rarity — a rock star of British business.”

After taking over as chief executive in 1995, Browne led BP into a series of daring takeovers, including Amoco and Arco in the U.S., and tripled the company’s share price.

In a move that won him few friends elsewhere in the oil business, he embraced renewable energy and adopted the slogan “beyond petroleum.” The company’s name was changed from British Petroleum to BP and the logo evolved from a shield to the “helios,” a sort of green and yellow sunflower.

Named a British lord in 2001, Browne was featured in Vanity Fair magazine and his home was in Architectural Digest. Notoriously, he was dubbed the “Sun King” in a Financial Times profile, a tag that implied that even then there was some skepticism about his management style.

All the while, however, “warning signs were piling up,” Steffy says. “Beneath the veneer of fawning media coverage, BP’s oil operations, which generated most of the company’s revenue but far fewer headlines, were beginning to fray.”

The veneer was shattered in March 2005 by the Texas City explosion, which killed 15 people. It was that accident that drew Americans’ attention to BP, a company that had until then been “little more than a logo on a Matchbox truck.”

As the full details of the disaster emerged, it became clear that BP’s executives, up to and including Browne, had failed to take a strong enough lead in insisting on safety at the refinery.

Other, less catastrophic, problems followed, including the partial flooding of the flagship Thunder Horse production platform in the Gulf of Mexico, allegations of market manipulation by oil and gas traders, and spills from corroded pipes in Alaska that forced the temporary shutdown of the pipeline system.

It is that litany of failures, and many smaller ones besides, that meant that, when the Deepwater Horizon rig exploded on April 20, killing 11 men, it seemed inevitable that it had been working under contract to BP.

This came in spite of the promise of a fresh start from Tony Hayward, who took over from Browne as chief executive in 2007. Hayward warned that it would take five years to implement the lessons learned from Texas City. As it turned out, he had only three.

Steffy’s account of the events leading up to and following the Deepwater Horizon explosion are the most dramatic but also the least satisfying part of the book. The narrative is gripping but key questions about what was going on behind the scenes, in the White House as well as at BP, are left unanswered.

The book also suffers from going to press while the U.S. inquiry into the spill is throwing out revelations about what happened before and after the accident.

Some factors that now seem to be relatively unimportant are stressed in the book, while others that now have moved to center stage, such as the roles of other companies in drilling the Macondo well, including Transocean and Halliburton, are left out.

Above all, there is no convincing account of how BP has serially failed to live up to its ambition of delivering, in Hayward’s words, “safe and reliable operations.”

Several underlying causes are suggested, in line with explanations offered by other commentators: the failure to integrate the U.S. acquisitions properly; a decentralized “entrepreneurial culture”; pressure from the top for cost cuts that ran counter to declared safety objectives; a slack and corrupt regulatory regime.

Steffy suggests that “Hayward, like Browne before him, was blind to the consequences of his actions because … neither chief executive ever stood amid the charred rubble and burned flesh of their own decisions.”

It is a cheap shot, and factually incorrect; one of a handful of lapses into purple prose that mar what is generally a carefully and powerfully written story.

The question “What is wrong with BP?” is of vital importance to everyone who works for or invests in the company. It deserves a better answer.

Ed Crooks is the New York-based U.S. industry and energy editor of the Financial Times of London, in which this review first appeared.