Another $360m has been added to BP’s bill for the Gulf of Mexico clean-up job: under pressure from the US government, it’s agreed to fund the construction of six sand barriers off the coast of Louisiana, intended to prevent the oil reaching the threatened wetlands (that’s a lot of sand). But the worrying thing is that BP still shows no sign of getting a handle on costs. It’s already spent over $1bn, and with Tony Hayward admitting to the FT today that the oil giant didn’t have the tools or the technology to deal with a spill like this, investors will be increasingly nervous that the final clean-up bill could be an awful lot higher than this…
In the final reckoning, this latest outlay may turn out to be a relative drop in the ocean (so to speak) for BP in terms of the overall bill – which some are now estimating could run to $20bn. But it’s still a huge amount of money, and points to its increasingly desperate attempts to placate the furious US authorities and be seen to be doing something useful. After all, with its latest solution suffering another setback yesterday – a saw that was meant to be cutting the damaged pipe got stuck, although it’s now been freed – it’s not exactly filling anyone with confidence that it’s going to stop the problem at source.
According to CEO Tony Hayward, the main problem is that the oil industry just wasn’t ready for a deep-sea leak of this kind. He told the FT today that it was ‘an entirely fair criticism’ to suggest they were unprepared, saying it was ‘undoubtedly true that we did not have the tools you would want in your tool-kit.’ In fact, many of the techniques employed to fix the problem were the same ones used for the Ixtoc 1 spill in the same region back in 1979; although the industry is apparently much better at dealing with surface containment since Exxon Valdez in 1989, deep-sea techniques just haven’t moved on in the same way, he said. All very well – but we doubt it will be much consolation to the good people of Louisiana.
In fact, given BP’s dismal standing State-side in the light of this calamity, the financial fall-out is unlikely to be limited to the cost of clean-up and compensation. President Obama is already urging Congress to pass laws stopping tax breaks for oil companies, and the chances of BP getting more contracts to drill in the Gulf must be about as high as those of Hayward succeeding him as President...
In today's bulletin:
Bank of England Governor turns down pay hike - as job gets harder?
BP coughs up for sand barriers as Tony Hayward admits to failings
Punctuality up, but profits down - Network Rail under fire again
John Vincent: Brands should be wonderful from the inside
Coffee power is just a bunch of froth?