Was BP acting in the best interest of British pensioners?

BP CEO Tony Hayward will appear before the House Energy & Commerce Committee Thursday

On Thursday, Tony Hayward will appear before the House Committee on Energy and Commerce, and offer testimony about BP’s failures on the Deepwater Horizon Rig.  These documents, released by the Committee in advance of the hearing, make it clear that BP cut corners.  This e-mail, between BP engineers a week before the blowout, discusses BP’s choice of a faster, less expensive, and less protective casing for the well:

From: Morel, Brian P

Sent: Wednesday, April 14, 2010 1:31 PM

To: Miller, Richard A

Cc: Hafle, Mark E

Subject: Macondo APB

Rich,

There is a chance we could run a production liner on Macondo instead of the planned long string. As this does not change much for APB based on the original design assumptions of a trapped annular, I don’t see any major effects, but wanted to confirm I am not missing something. Attached is the proposed schematic, please let me know if you have any questions. We could be running it in 2-3 days, so need a relative quick response. Sorry for the late notice, this has been nightmare well which has everyone all over the place.

Thanks

Of course, among the documents are also approval e-mails from the Minerals Management Service.  There are also e-mails from Halliburton, showing that BP went against the Halliburton recommendation for the number of centralizers, devices to keep the casing centered on the well while the cement was poured and set.  Halliburton recommended 21, but BP went with only six, because the well was behind schedule.

BP and the British Government, are fighting American efforts to force BP to set up an escrow account to ensure claims settlement, and to cease payment of dividends.  Of course, in Britain, BP dividends account for a large portion of retirement income:

‘BP’s position at the top of the London Stock Exchange and its previous reliability have made it a bedrock
of almost every pension fund in the country, meaning its value is crucial to millions of workers. The firm’s dividend payments, which amount to more than £7 billion a year, account for £1 in every £6 paid out in dividends to British pension pots. BP is so concerned about Mr Obama’s power to affect share value that it has urged David Cameron to appeal to the White House on its behalf. Downing Street, however, has refused to get involved. “We need to ensure that BP is not unfairly treated – it is not some bloodless corporation,” said one of Britain’s top fund managers. “Hit BP and a lot of people get hit. UK pension money becomes a donation to the US government and the lawyers at the expense of Mrs Jones and other pension funds.”’

Now, did BP have British pensioners in mind when it opted for cheaper casing, and fewer centralizers?  No, it opted for risky cost-cutting instead of safe, secure profit that pensioners would expect. Will blaming the President help the pensioners?  Not quite.  The pensioners are simply learning the same lesson that stockholders of Enron and Worldcom learned, that many corporations incentivize short term earnings without an eye to the long term.

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2 Comments on “Was BP acting in the best interest of British pensioners?”

  1. Mary says:

    Love the final sentence! Without minimizing the real impact this has on millions of shareholders – including pensioners – the reality is that even blue chip stocks are part of an economic system that is messy and complex, where there’s no such thing as a Sure Bet. Events like this highlight the real dangers embedded in any system in which individual institutions are allowed to get Too Big to Fail. Systems theory suggests that real resilience requires many small links rather than a few big ones. Unfortunately, the British pension system is learning this the hard way.

  2. […] and object to the escrow account.  It is a mystery how one could side with BP on this case, with clear evidence of their liability.  Ultimately, a huge company like BP has more power than most modern States.  Even in the United […]


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