Companies involved in the Horizon disaster are waiting uncomfortably tonight for the formal release of BP's internal report on Wednesday morning. The atmosphere is similar to soldiers in the trenches overnight knowing there will be a heated battle at dawn.
BP will formerly release the results of its internal study on the causes leading up to the Horizon disaster. Some facts have already been leaked and supposedly BP will place some of the blame on their own engineers for misreading the results of a pressure test after the well was cemented in by Halliburton just hours before the explosion. However, with tens of billions of dollars on the line BP is also expected to place blame on everyone involved in the well in hopes that some of the blame sticks and they can offload some of the fines and expenses.
The report was produced by their internal safety investigation team, which interviewed everyone on the rig, engineers in Houston and first responders and bystanders to the disaster. I am sure it is very comprehensive but I am also sure the investigators were biased. It is a natural human failing.
The others working on the rig or responsible for some of the equipment included Transocean, Cameron International, Halliburton, Schlumberger and a couple other minor participants. Anadarko Petroleum and Mitsui were stake holders with a 35% ownership in the well. They have both refused to pay any damages because of "gross negligence" by BP.
Everyone concerned will be firing off their own position papers within minutes of the BP release on Wednesday. The BP release will be the first salvo in what is sure to be a continued exchange of fire in the weeks ahead. By one count there are 13 different official groups including Senators, House members, energy panels, state and local panels as well as industry associations conducting their own independent investigations. The BP position paper will be widely disseminated and hotly contested.
Last week BP put out a position paper on the challenges involved in dealing with the disaster. It covered every aspect of the technical challenges involved and could be seen as laying the groundwork for a legal battle over fines and penalties. "Look how good we did under extreme circumstances." They pointed out things like the peak deployment of 27 ROVs at extreme depth, under harsh pressure and temperature conditions and low visibility. I am sure monitoring 27 ROVs, assigning each a task, providing personnel and equipment and coordinating each one with the other 26 was a monumental job in itself. Of course they would not have had to corner the market on ROVs if they had been more careful on the well.
The key in the already published report is what BP and other companies learned from the effort. Drillers are literally years ahead in their knowledge, preparation and equipment should there ever be another blowout. The report is interesting reading even for someone not fluent in oilspeak. The complexity they present and the graphics and video are very comprehensive. I would show some of the graphics here but they are too large and complex for a 600 pixel width page. READ IT HERE
BP may be showing some understanding of reality by their announcement this week that they were expanding their asset sales to $40 billion from $30 billion. The stake in Alaska's Prudhoe Bay development is up for sale and that is rumored to be worth $20 billion. TNK-BP is rumored to be in talks to buy another $10 billion in assets from BP. The added $10 billion could be an admission that they realize they are on the hook for a lot more money than initially thought.
They claim the cost of the spill to date has been $8 billion and while those costs will be coming to a close once the relief well is completed the fines, penalties and cleanup expenses will be ongoing for years to come.
About the only sure thing for Wednesday is the flurry of competing press releases starting with the BP report. It should be an interesting day.
*** We moved servers over the weekend and broke a few processes in the move. One of the things broken was the email newsletter. The newsletter items were posted and appear on the website but the newsletter was not emailed. Please check the website for the last 48 hours of news. The problem has been resolved and future emails will be on schedule. ***
This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.
Subscribe to Energy Picks Newsletter