This Report Could Reduce BP's Liabilities

Posted by Ian Cooper - Thursday, January 6th, 2011

From Financial Times:

"The report says: “Most of the mistakes and oversights at Macondo can be traced back to a single overarching failure – a failure of management. Better management by BP, Halliburton, and Transocean would almost certainly have prevented the blow-out.” It warns that “the root causes are systemic” and without significant reform of the industry and its regulation, “might well recur”.

The Commission’s full report, including its assessment of the response to the spill, will be published on Tuesday.

Its conclusions will form part of the basis for legal action against BP and the other companies, including the civil cases being pursued by the US government that could result in tens of billions of dollars in damages.

William Reilly, one of the Commission’s co-chairs, pointed to a “pervasive problem of a complacent industry”.

He added: “Given the documented failings of both Transocean and Halliburton, both of which serve the offshore industry in virtually every ocean, I reluctantly conclude we have a system-wide problem.”

The disaster was caused by an undetected surge of oil and gas that rose up the pipe connecting the well to the rig on the surface and then ignited.

The rig burned for two days and then sank, leaving oil spewing from broken pipes on the seabed in 5,000 feet of water.

The report identifies several central mistakes made by BP staff, including their misinterpretation of the vital “negative pressure test”, used to see whether the well had been properly sealed with cement before the rig moved away. It also highlights their decision to replace the heavy drilling “mud” in the pipes leading to the rig with lighter seawater before a seal had been placed in the top of the well.

Halliburton, which was the contractor working on cementing the well, is criticised for its failure to ensure that the cement had been tested properly. Transocean, which owned and operated the rig, had failed to warn its crew about the lessons from a “near miss” in the North Sea only four months before the disaster.

Despite the critical findings, BP shares rose above 500p for the first time since May last year as analysts said the report shared blame for the spill..."

Read more here.

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