Political India: Engaging America

From The Hindu

In a bid to save what is left of its reputation, BP announced that its gaffe-prone British CEO, Tony Hayward would step down and be replaced by an American chemical engineer and head of mop-up operations in the Gulf of Mexico, Robert Dudley.

The company, which has not only come under scathing attacks for its role in the oil spill but also courted controversy relating to the release of convicted Libyan terrorist Abdel Baset al-Megrahi, said Mr. Hayward would stop functioning as group chief executive with effect from October 1, 2010.

Seeking to project the change in the leadership as a break from its past, BP chairman Carl-Henric Svanberg said, "The tragedy of the Macondo well explosion and subsequent environmental damage has been a watershed incident. BP... will be a different company going forward, requiring fresh leadership supported by robust governance and a very engaged board."

The announcement came even as BP admitted that it had made a record "replacement cost" loss during the second quarter of the year, amounting to a staggering $17 billion. The company said it was facing a charge of $32.2 billion, "to reflect the impact of the Gulf of Mexico oil spill, including costs to date of $2.9 billion for the response and a charge of $29.3 billion for future costs, including the funding of the $20 billion escrow fund".

Remarking on the financial results, Mr. Hayward said, "We expect we will pay the substantial majority of the remaining direct spill response costs by the end of the year. Other costs are likely to be spread over a number of years, including any fines and penalties, longer-term remediation, compensation and litigation costs."

On stepping into the shoes of Mr. Hayward, Mr. Dudley said that in the change of roles, he particularly wanted the people of the Gulf Coast to know that his commitment to remediation and restitution in the region was not lessened. "I gave a promise to make it right and I will keep that promise," he said.

In a comment that reflected the management’s commitment to those affected by the spill but equally to BP shareholders, Mr. Svanberg said, "We remain confident in our ability to meet our obligations to those on the Gulf Coast of the United States, other impacted parties and all our stakeholders... As we said last month, the Board remains strongly committed to the payment of future dividends and delivering long term value to shareholders."

Labels: BP, BP oil spill, Robert Dudley, Tony Hayward

From The Hindu

A rare public exchange of letters between National Incident Commander in charge of the Gulf of Mexico oil spill Thad Allen and Robert Dudley, who is leading the mop-up operations at BP, showed the government has been pressing the oil major to come up with plans to accelerate its collection of the oil.

It began on Thursday when Admiral Allen wrote to Mr. Dudley saying, “We are entering a critical stage in the Deepwater Horizon response where key decisions will be made in executing plans for total collection of oil at the wellhead and for potentially securing the well completely.”

Not mincing his words, Admiral Allen on Thursday demanded that Mr. Dudley provide him, within 24 hours, with a detailed timeline outlining BP's plans to affix onto the well a second cap — called a “capping stack” — that could significantly increase the containment capacity of the system. Paradoxically, the process for deployment of the capping stack would, Admiral Allen acknowledged, increase amount oil leaking temporarily. To mitigate this heightened flow, the Admiral asked Mr. Dudley to explain his plans to use a third containment ship, the Helix Producer. “I must have knowledge of the steps and decision points involved; mitigation efforts to be implemented; and contingency plans if these efforts are not successful,” he emphasised.

After scrambling to provide the Admiral with a response within the deadline, Mr. Dudley said in his letter that though BP had initially scheduled the capping stack installation to follow the Helix Producer beginning containment operations, “as weather has impacted our ability to execute these activities in series we … have proposed that the capping stack procedure be implemented in parallel with the start-up of the Helix Producer.”

After review Admiral Allen approved the plan, saying later to media: “After reviewing Bob Dudley's response to my July 8 letter … I approved BP's plan to simultaneously install the Helix Producer and ‘capping stack' containment mechanisms, which will require temporary suspension of the current top hat containment system.”

The Admiral added that he had validated this plan because the capacity for oil containment when the installations were complete would be “far greater than the capabilities we have achieved using current systems”. He also noted that weather forecasts had turned more favourable over the last few days and “will provide the working conditions necessary for these transitions to be successfully completed without delays”.

Admiral Allen said the transition to the new containment infrastructure could begin “in the next days but will take seven to ten days to complete”. He also said the entire process, “once we start unbolting until we're in a position to put the new cap on, could be three to four days”.

The Admiral conceded that there would be a spike in the outflow volume, saying: “There will be a period of time where the Discover Enterprise will have to move off station to allow us to put the new capping device on. So the amount they've been able to recover which is roughly around let's say 15,000 barrels a day will have to be released while we're putting the new cap on.”

Labels: British Petroleum, capping stack, Gulf of Mexico, oil spill, Robert Dudley, Thad Allen