Will BP recover

Discussion in 'Current Affairs' started by w.anchor, Jun 2, 2010.

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  1. I don't know what percentage of BP's revenue comes from the US .But I should imagine that new drilling licenses will be hard to come by for them after the Gulf of Mexico spill.Not just in the States this could lead to a lack of confidence elsewhere in the world.I think Burgen has it right a take over is on it's way I hope I'm wrong but it's the only way I can see them moving forward after this disaster.
    The latest effort to cap the well with heavy mud and gulf balls has not been a success to date .And new estermates of the flow rate from the well are much higher than the first estermate of 5000 barrels per day from ROV video pictures of the blow out preventer.
  2. Yes! They have plenty of other fish to fry - not that you'd want to fry any fish in that neck of the woods at the moment 8O
  3. Ironically the thing that is saving BP from a take-over bid at the moment is the Macondo oil-spill. No one wants to touch the company until the full extent of it's legal and regulatory problems are identified.

    The Company in now under Criminal Investigation.

    When this was announced the Company share price [common stock] fell another 15%.

    Since April $75b [around 30%] has been wiped off the value of the Company, leaving it with a valuation of $114b

    This is by far the weakest position of any of the Super Majors [Exxon is valued at around $290b].

    The GoM provides around 26% of BP production capacity and around 30% of Company profits.

    The US gubbermint are going to make sure that BP are excluded from further acreage awards.

    The US gubbermint are going to shake down BP for a lot of compensatory settlements.

    Total out of pocket costs for the spill so far $1b

    Identified costs so far $7.8b.


    My view is that if they can control the leak in the next month then they MAY survive.

    If they have to wait until the directional drilling interception occurs in August then they are Fcuked because the cost of the spill will have rocketed exponentially as the oil in the Gulf increases.

    My view - Likely bidders will wait until the true costs are identified and then drive a stake through BP's heart.
  4. The US have still to pay compensation for Bhopal so fcuk em
  5. Full and final settlement of $470 million was made in 1999.
  6. It will be interesting. The legal position and the political position in the US are at loggerheads.

    Legally, the basic costs are capped at a ridiculously small figure, but the politicans are threatening back-dating new laws and are putting political pressure on BP to pay for "everything". Now, I believe that BP (AND ITS CONTRACTORS) should pay, but a government tearing up the law for PR/political purposes is exactly what the US objects to when it happens elsewhere (especially when foreign governments do it to US companies). It is fun seeing the hypocrisy tumbling from US politicans - and the American media has its normal bout of "forgetfulness" on such occassions.

    The big "I AM" from Obama recently of "we will ensure they are criminally prosecuted" is cant. It is no more than it should do, and that BP should expect. For god's sake, 11 (?) people were killed ! (I am annoyed at myself, there has been so much concentration on the oil spillage that the actual people killed have been "forgotten" - at least in the UK press.)

    So much political posturing, so little sanity.

    As to the accident itself. In reality, whilst BP are ultimately responsible (no-one, including themselves, have tried to deny it) their actual culpability is (SEEMINGLY) relatively little. The rig was manned, operated and run to procedures written by an American company and the blow-out preventer was likewise an American product. BP did have inputs which, of course, the US firms (for legal/financial reasons) are trying to hype up, but seemingly these were RELATIVELY small). The US is having fun trying to ignore the "American made" nature of the disaster by hitting BP . The real problem for BP will be that Rig operator and the blow-out preventer manufacture will PROBABLY have only limited (even if large) liability as that is the norm in Petro-chem where over-all insurance (and self-insurance) is covered by the client. The legal case is going to be horrendous, long-running and only please the lawyers.

    The main thing people should be thinking is "there, but for the grace of god, goes us".

  7. I have highlighted the paragraphs where IMHO you stray in your summary. Drilling a deep-water well is complicated and not easy for the lay-man to understand so let me outline the main players and events for you.

    The BoP manufacturer is Cameron. They have not figured in any of the reports thus far; for good reason. They carry their own Liability Insurance.

    The lease-holder and the owner of the well is BP. Because of the costs of insurance and the size of the Company it is usual for BP to self-insure via a tame in-house insurer based in the Channel Islands.

    The driller and rig-owner is Horizon Drilling. They carry their own Liability Insurance.

    The cement company is Ali Burton. They carry their own Liability Insurance.

    The data-logging / wire-line company is Schlumberger. They carry their own Liability Insurance.

    There is adequate insurance coverage by all individual companies unless one or more of them can be proved negligent. The exception is BP. Self insurance works well for company bottom-lines right up to the point where a disaster occurs and it becomes critical.

    This was a problematic well and very high-pressure [15000psi+]

    It had been kicking repeatedly. [Kicks are high-pressure gas surges down-hole].

    The kicks were controlled by increasing the amount and weight of the drill-mud [It's not mud BTW].

    The drilling program procedures were designed by BP and they specified the Marine Riser / casing / drill-string / drill-bits / cementation etc etc.

    A lot of the information of what happened in the last 48hrs/24hrs/8hrs of the operation is being closely guarded BUT it seems that the reason that Cameron are not in the limelight for the BoP failure is that the BoP had had unauthorized [non Cameron approved] modifications made to it and the main packer seals had been damaged a week previously. Not good for Horizon [who owned the BoP] or for BP [IF BP knew about the modifications and packer seal failure].

    The real key to understanding the Failure Mode is why Schlumberger were demobilized from The Deep Water Horizon a few hours prior to loss of well-control without performing a CBL.

    This is a Cement Bond Log and would have confirmed that the cement packers installed by Ali Burton were intact and sealed [and therefore that it was safe and prudent to remove the drilling-mud]

    So... as in any accident the holes in the Swiss Cheese begin to align:-

    1. The CBL was not done [lots of rumours swirling around this].

    2. The cement packers had [apparently] failed.

    3. The drill mud was being extracted from down-hole and being cross-decked to a supply boat [absolutely inexplicable].

    At this stage the well kicked [15000psi remember BUT massive volume as the gas expands - {Boyles Law}] and control is lost.

    4. The remaining down-hole mud and water is ejected over the top of the derrick [280 feet].

    5. The BoP is designed to stop this by shearing and crushing the casing. It didn't work on manual mode and the auto didn't either.

    6. Explosive gas begins to cascade from the drill-floor [heavier than air]. All deck machinery is zone rated but the amount of gas is so massive that it found an ignition source and ignited. Bye bye the 11 drillers [who seem to have been entirely forgotten about in all the news reports]

    7. The gas fire is further fueled by oil rising in the casing / riser and the DW Horizon melts and sinks.

    I have read my well-control procedures and notes extensively over the past few weeks and IMHO this accident could not have happened without a disregard for in-house procedures. Apparently there was an almighty row [already in the public domain] between the drillers and BP about removing the drilling-mud.

    If this proves correct and the reasons for the Schlumberger crew departure are established it is likely that BP will end up with the entire sh*t sandwich on their plate.

    My summary of my very long-winded and probably boring explanation is that BP will be found culpable AND responsible. An entirely bad combination.
  8. Nice post Bergen, Not longwinded or boring at all. As someone involved in
    Quality Assurance procedures in a hazardous enviroment it made the hair on my neck stand up .
  9. Quebec followed by Alpha and Quebec followed by Charlie are acronyms that only have lip-service paid to them in many GoM operations.
  10. Only to True, Untill the Shite hits the fan !
  11. Yes nice post Burgen its brought back memories of the Ocean Odyssey and the Staydive.So if they only play lip-service in the GoM(where there is some state control) what do they do get away with in West Africa. :oops:
  12. That's the problem when your only tool is a hammer. Every problem becomes a nail.
  13. Bergen,

    Your ideas on "self-insurance" seem a little contradictory. The norm is to be insured for certain risks, but for total risks they "self-insure". Again it is normal for different contracts to have differing insurance cover and indemnities depending on Company policies and commercial negotiation. I have not heard of reliable details of the insurance details of the project, and especially of what indemnities or guarantees were in place between the parties.

    The trouble with trying to assign blame at this time is that each company will be trying to hide any facts that are detrimental to their legal position and try to play the blame game against the others.

    (P.S. I love your name for Haliburton)

  14. I've just finished a survey/construction project in the G.O.M. I normally do North Sea or Oz, this was a real eye opener. 40 year old construction barge, minging living and working conditions that would never pass muster anywhere else, apart from Persian Gulf maybe.

    As the only Brit onboard I was the only one with proper PPE, T-Shirt and jeans, not coveralls with reflector strips etc, seemed to be de-rigeur. Dirty working rig was acceptable in the dining hall and communal areas.

    IMHO Safety starts at a personal level and should permeate throughout the whole project from there. The bottom line on this project was, that if the production bonus is threatened, kiss goodbye to proper laid down procedures and safety standards.

    Edited for spelling
  15. Let me try again:-

    The sub-contractors to BP carry full liability insurance. In the case of Horizon they are insured with Lloyds of London; who, of course, spread their risk by re-insuring through other insurers. In addition to this all of the sub-contractors will carry Additional Insured Protection. Again in the case of Horizon this is $700m.

    Meanwhile BP has a tame in-house insurer [Jupiter Insurance] in Guernsey. It is an SPV [special purpose vehicle] which prevents public disclosure of it's assets or liabilities.

    Jupiter does not re-insure BP through another firms or share the risk. BP has never prepared Jupiter Insurance to take such a hit.

    With me so far??

    When contracts are written there are certain things which are included and certain things which are excluded between the parties.

    Standard boiler-plate for GoM is that weather down-time is the sub-contractors responsibility UNLESS the weather is a named storm; in which case the weather costs revert to the Operator [BP / Shell Exxon etc].

    Where it gets interesting now is that the sub-contractors have adequate insurance but BP doesn't.

    [If I can digress to Bhopal - Union Carbide never paid a penny - the $470m settlement was all from the insurers].

    So now what BP is attempting to do is dip into the sub-contractor's insurance AND in Lloyds of London v BP Plc at the US District Court in Houston [Texarse] there is a petition to dismiss BP attempts on the grounds that the costs claimed are specifically excluded under the Master Contract.

  16. Sounds like Global Industries.
  17. I can neither confirm nor deny!!!!!
  18. Bergen,

    If that is the case then it is not petro-chem normal procedure, and it is highly inefficient (i.e. costly).

    Your post does not indicate any indemnities in place which would actually direct the normal contractual insured losses to particular parties - again unusual.

    "Self-insurance" is not the same as having a "tame" insurer.

    You seem to be mis-understanding the way the responsibilities (and hence costs) of insurances are spread around. It is possible for ALL parties to have unlimited liability and insurance, but then each party would pay huge premiums and those would be passed up the contracting chain each being paid for with a premium as it gets included in the higher level contract. It is more normal (but not compulsory) for indemnities to be in place to limit contractor's liabilities (and hence insurance amounts and premiums) with others (normally the client) taking the overall hit - this is cheaper overall. The way you have written is perfectly possible, merely expensive.

    IF, BP "self-insure" certain risks they merely don't insure - they calculate that over the long-term they will spend less money paying for liabilites out of their own money than they would if they actually insured through the insurance market.

    OF COURSE, there are certain risks that legally (various countries laws differ) that companies are obliged to insure for.

  19. Ultimate liability for the disaster will lie at the feet of one of the large corporations, but the problem was probably caused by a tobacco-chewing retard called Hank

    NB, my only experience in this area has come from watching the rig documentaries on telly

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