The FT’s Ed Crooks won the UK Foreign Press Association’s print and web news story of the year for this inside story of BP’s response to the Gulf of Mexico oil spill. The judges cited the story, which appeared in the FT’s Weekend Magazine, as an example of “rigorous and balanced” journalism on “one of the biggest stories of the year”.

For three days at the end of May, the fates of Britain’s biggest oil company and America’s president could be followed minute by minute on a computer display, sketched out by a dark line snaking across a white screen. BP chief executive Tony Hayward, US energy secretary Steven Chu and about 50 top engineers and scientific advisers watched in rapt concentration, studying the display for what it might reveal. Could BP survive in the US, its most important territory? Would Barack Obama be more than a one-term president? The screen could hold the answers.

In a makeshift control centre on the third floor of BP’s Houston offices, they were tracking in real time the company’s best hope of plugging the leaking Macondo well, 400 miles away, in the Gulf of Mexico, and a further mile below sea level. This was the “top kill”, the latest entry in BP’s baroque lexicon for its ever more desperate attempts to staunch the flow of oil – this time by pumping heavy drilling fluid, known as “mud”, down the hole. One oil engineer described the exercise as akin to trying to stop a leaking tap by jamming a spouting hose up against it; but it had worked with leaking wells in Kuwait and Iraq, although not at such extreme depths.

In Houston, alongside the main display, showing pressure levels in the well, other screens played video feeds from remote-controlled submarines recording the oil spewing from the broken pipes on the sea bed. The same footage was going out live on the widescreen TV in the building’s lobby, and on televisions and computer screens around the world. The American public had been gripped by the battle to seal the well, which had been leaking oil since the explosion on the Deepwater Horizon drilling rig on April 20, which killed 11 people.

The spill was dominating the news, and Obama was coming under fire for his failure to, as he put it, “just plug the damn hole”. By the time the top-kill attempt kicked off, more than three weeks had passed since Ken Salazar, the cowboy-booted Coloradan interior secretary, promised that the administration would keep one of those boots “on BP’s throat”. Since then, a succession of attempts to staunch the spill had failed, and oil had started washing up in the vulnerable wetlands of Louisiana. The stakes had been raised further on May 27, when scientists advising the US government more than doubled their estimate of the rate at which oil was escaping from the well.

Hayward and Chu both knew that their futures could depend on making the top kill work. If it failed, oil would vent into the Gulf for another two months at least.

Inside the command centre, the tension was excruciating. The engineers from BP, dozens of other companies and the US government, say people who were there, were crammed into a room about 30ft across for more than three days from when the attempt began – lunchtime on Wednesday, May 26. As the days passed, spirits rose and fell and rose again. To succeed, BP had to be able to pump the mud right down to the bottom of the well, 13,000ft below the sea bed, so it could hold back the gushing oil and allow the bore to be plugged with cement. The pressure readings would tell whether that attempt was making progress.

On Thursday morning, Admiral Thad Allen of the US Coast Guard, the public face of the incident response team, reported that “the top kill procedure is … moving along as everyone had hoped.” As the week wore on, however, hopes began to fade. However hard BP pumped the mud it just would not go far enough down the well. By Friday, the team had decided on another step: they would pump a “junk shot”, fragments of material such as rope fibres and rubber balls, into the broken valves on the sea bed, in the hope of clogging them and stopping the mud escaping, taking the same route as the oil. It sounded like a desperate measure, and that is exactly what it was. The top kill was failing.

Emotionally, BP’s staff and management had invested heavily in the operation’s success. Before top kill started, the company’s executives were genuinely optimistic that it might work, and several times Hayward suggested it had a 60-70 per cent chance of success. For a time, Chu pushed the BP team to keep going, to make sure they had exhausted every possible approach, but by Saturday afternoon they were losing heart. (BP later decided that the steel casing inside the well bore might have been ruptured. As fast as the mud was pumped down, it was escaping though holes in the casing and disappearing into the surrounding rock.) At last, as evening came, Chu told Hayward that they should give up, and at 5.25pm Doug Suttles, BP’s chief operating officer for exploration and production, announced it: top kill had failed. BP’s future was now hanging by a thread.

The Deepwater Horizon accident has been one of the most shattering disasters ever to hit a large international company. Not because of the 11 deaths on the rig, terrible though they were. Not because of the environmental impact, or even the economic damage to the fishing and tourist industries of the Gulf. The devastating blow to BP comes because of the way the disaster has pitted the company against the US government and the American people. The story of the spill is how the fury of a nation was turned on a single company.

Less than a year ago, Deepwater Horizon seemed to have set BP on a very different course. Last summer, the group drilled the deepest well ever developed for a commercial operation and struck oil. On September 2, it announced it had discovered a “giant” field, christened Tiber, which was likely to hold more than 500 million barrels of recoverable oil. BP’s shares rose by 4 per cent in a single day, a rare event for a company of BP’s size. Moreover, it seemed that the initial reaction was, if anything, understated. Tiber was a harbinger of a new dawn for the company, in which production from the deep water of the Gulf would drive global growth.

The Deepwater Horizon rig was at the forefront of that campaign. One of the flagships of its owner, Transocean, the world’s largest offshore drilling contractor, it had repeatedly proved its worth to BP, helping it discover another large field, Kaskida, in 2006. The Tiber and Kaskida fields lie in older and deeper rocks than the strata tapped for most oil and gas production in the Gulf – the Paleogene layer, from the era following the extinction of the dinosaurs. Together, they suggest there could be huge undiscovered resources in the US continental shelf. The challenges of pressures and temperatures so far beneath the surface were daunting, but BP was confident that they could be managed. In a world where western oil companies either face great difficulties or are shut out altogether from the most geologically accessible fields, from Venezuela to Saudi Arabia, they need to be able to exploit the more technically difficult reserves if they are to grow. BP prided itself on its expertise in producing oil and gas from deep water, and the Gulf of Mexico was its most promising prospect for extending that lead.

After the Tiber discovery, Andy Inglis, BP’s head of exploration and production (E&P), talked about the company’s expertise in working in the most challenging of deep water fields. “We don’t do simple things,” he boasted. “We are prepared to work at the frontier, and manage the risks.” BP was already the largest producer in the Gulf, thanks to its mighty Thunder Horse platform, which last year produced 250,000 barrels equivalent of oil and gas per day. It also had greater oil and gas reserves, and more development leases, than any other company. Inside BP, the Gulf E&P staff were seen as the paladins: the champions who could perform impossible feats, and were rewarded accordingly. In a sign of BP’s commitment, Inglis moved the headquarters of his global E&P division to Houston.

For the White House, too, there was an opportunity. Since Richard Nixon, US presidents have been talking about curbing the country’s dependence on foreign oil; now there appeared to be a chance of making progress. Obama had always been a critic of the oil industry and a supporter of renewables, but on March 31 he announced a plan to lift some of the restrictions on domestic offshore drilling. It went against all his instincts, but the president hoped to win the support of some Republicans for a watered-down climate change and energy bill. He needed their support for a package including curbs on CO2 emissions and support for renewable energy. The excitement about the revival of American oil production helped seal the deal.

It was entirely characteristic of BP to be in the forefront of opening up this new frontier. For many Britons, the company is seen as steady, reliable, a little dull. The truth is very different. Of the world’s biggest oil companies, BP has long been the most swashbuckling, the most entrepreneurial, the most creative. In large part, this is the BP that was made by Lord Browne, the chief executive from 1995 to 2007. He built the group through a series of ambitious deals and led pioneering ventures into Russia and – less successfully – China. Under Browne, heads of business units were allowed considerable operational autonomy and encouraged to use their initiative. It was a culture where imagination was rewarded. “Every week you had to have a new idea,” says one BP executive. “And the people who had the best and boldest new ideas were the ones who rose up the organisation.”

Until 2005, that approach appeared to be paying off. Then came a string of problems in the US, including a 2005 explosion at the company’s Texas City refinery, which killed 15 people; an oil spill in Alaska caused by leakage from corroded pipes; and an attempt by a BP trader to corner the propane gas market, which drew the largest-ever fine for market manipulation from the US commodities regulator.

That string of problems convinced many people, inside and outside the company, that BP was not merely suffering a run of bad luck. It seemed something was fundamentally wrong with its corporate culture in America. In the words of the report on the Texas City disaster, led by former US secretary of state James Baker: “BP has not provided effective process safety leadership and has not adequately established process safety as a core value” in its US refineries.

When BP’s board was seeking a replacement for Browne in 2006, they were looking for someone very different to lead the group. In Hayward, a grammar-school educated 53-year-old born in Slough, they found him. Browne was diffident, an opera fan, interested in climate change and renewable energy. Hayward was approachable, a sailor, triathlete and West Ham fan who said that the company, when he took over, had “too many people working to save the world”.

Hayward immediately set out implementing his mandate to be “not Lord Browne”. The complexity of the organisation was reduced, divisions were restructured, and administration and support functions were cut. Investment in renewable energy was scaled back. A geologist by training, with a scientist’s focused mind, Hayward said that, above all, his purpose was to focus “like a laser” on safe and reliable operations.

The culture of BP began to change. Commercial flair, creativity and unorthodox thinking were no longer the supreme values; “professional excellence” was what counted. Hayward was committed to making sure that nothing like Texas City ever happened again.

It was 7.24am on April 21 when Hayward’s phone rang. he was having breakfast in the hotel that he stays in when in London, near BP’s headquarters in St James’s Square. (His home is in rural Kent.) It was Andy Inglis, calling from Houston in the middle of the night. The news could only be bad.

Inglis told his boss that the Deepwater Horizon had exploded about three and a half hours before, and was still blazing fiercely. Workers on board were missing. It was obvious at once that this was the most serious level of incident that the company could face; Hayward quickly gathered his team at BP’s HQ. It included Steve Westwell, Hayward’s chief of staff, Rupert Bondy, the group’s general counsel, and Andrew Gowers, the group head of media. Inglis joined by telephone.

Hayward, he later told reporters, was shocked, sad – and angry. After everything he had tried to do to prevent such disasters, he was stunned that the accident could have happened. People who saw him in those first few days say he was, in quiet moments, sunk in anguished contemplation.

Introspection aside, in his outrage Hayward’s immediate instinct was to blame someone else, namely Transocean, the owner and operator of the rig. In his first public statements on the disaster, he said it was “their people, their processes” at work on the rig, and “not our accident”. What that reaction ignored, however, was BP’s role as overall supervisor and co-ordinator of the project, and those statements have since been qualified by the company, which has accepted that its staff were involved in key decisions on the rig.

Macondo, the prospect that the Deepwater Horizon was drilling, had seemed relatively simple compared with Tiber. It was in water almost 900ft deeper, but was only 13,000ft below the sea bed, instead of 31,000ft. It was merely deeper than the height of Mont Blanc, not Everest. The reserves were smaller, too: the field is thought to hold only 50 million barrels.

Yet from the start, Macondo – named after the doomed village in Gabriel García Márquez’s One Hundred Years of Solitude – had been a “nightmare”, in the words of one BP engineer working on it. In particular, it was susceptible to gas “kicks”: escapes of gas into the well bore that could cause explosions unless carefully handled. It appears that one of those gas kicks escaped all the way up the drilling pipes to the rig, bypassing several safeguards, where it ignited.

As the first day wore on, it became clear that the 11 missing rig workers were unlikely to be found. The next day, Hayward flew to Houston, and remained in the US with only a few brief interruptions for almost two months. It was clear he was driven by an urgent sense of his own responsibility for leading the company through the aftermath of the accident. “We will be judged by our response,” he said.

When he landed in Houston, Hayward said that although the blame might lie with Transocean, the oil was BP’s, and it was his job to clean it up. He even saw the spill as an opportunity for a model response to a serious accident in the Gulf, demonstrating what he believed would be BP’s exemplary corporate responsibility and transparency. “I want to be on the front foot in terms of communications,” he told his staff.

Hayward also thought he should be the public face of BP’s response, rather than Carl-Henric Svanberg, the chairman. Svanberg, like the rest of the board, was briefed on the accident on the first day. He and Hayward quickly reached the same conclusion: “There was no crisis that was ever made better by having two different people talk about it.” Svanberg flew to India on a company visit, then spent a night on his boat in Thailand before going on to the US, where he chaired BP’s first board meeting since the accident, on May 4.

Both BP and the US administration had been aware from the start that an accident in the Gulf could have a significant environmental impact. In seeking permits for wells to be drilled in the region, BP had said it could handle a leak of 250,000 barrels of oil per day (bpd), implying a spill on the scale of the Exxon Valdez every two days. Those claims were later shown to be ludicrously over-confident.

While the rig continued to burn, however, not much of the oil and gas was escaping into the water. After it sank on the Thursday, the submarines were sent down to see whether oil was leaking from the well. They saw nothing, and for a while there was a kind of phoney war, in which it was not clear how much if any oil might be spilled. A video briefly posted on the website for the US National Oceanic and Atmospheric Administration, showing a command centre where officials were discussing their response to the spill, captures the flavour of that short-lived period. Estimates of the possible size of the leak range up to 110,000 bpd, but the mood is relaxed and good-humoured. “Maybe this won’t be the spill of the decade,” one woman says. Obama was clearly unconcerned enough to go for a long weekend away. That time marked the start of a series of underestimates of the scale of the leak that was to shatter BP’s credibility with the American public.

Over the weekend of April 24-25, it became clear that oil was leaking from the well after all. Uncertainty over the rate of flow was huge, but BP circulated an estimate of “up to” 1,000 bpd. (The latest estimate is now about 35,000 bpd, and it could be 60,000 bpd.)

Board directors were being given regular updates on the accident; BP’s poor safety record in the US had long been in their sights, and they were initially more focused on the safety issues than the potential environmental impact. The rate at which the oil was escaping still seemed low, and BP had, in Hayward’s words, organised a “massive over-response” in terms of vessels, staff, dispersants and boom deployed to contain the oil.

Then, on April 28, the administration landed the first in a succession of forceful blows on BP. Government scientists had analysed the data and concluded the oil flow was more likely to be 5,000 bpd. It was the difference between expecting an Exxon Valdez-sized spill in up to a year, and expecting one every two months. The tension between company and government began to rise.

The following day, the atmosphere at the regular White House press briefing was electrified by the arrival of Janet Napolitano, the homeland security secretary; Lisa Jackson, head of the Environmental Protection Agency; Carol Browner, director of the White House agency for energy and climate change; and David Hayes, Salazar’s deputy at the interior department. It was the first outward sign that relations between BP and the administration were souring. When Sally Brice-O’Hara, the US Coast Guard admiral, described BP as a “partner” in the response, she was sharply corrected by Napolitano. “They are not our partner,” Napolitano said.

Washington was waking up to the idea that the incident could be very serious indeed. And down in the Gulf, the first signs of the damage were beginning to be felt.

Brittin Euspis and Trey Pique, the two captains of Voodoo Charter Fishing, sat at Louisiana’s Crystal Cove marina in a pick-up truck with their boat loaded on a trailer. “The way things are looking now, we won’t be able to fish for a few months,” Euspis told the FT on April 30, with the blank look of despair that was becoming characteristic of local fishermen. “This is the very beginning of our peak season,” he said. “This is the time we work 25 days a month.”

Rene Cross Junior, manager of the nearby Cypress Cove marina, said 30 to 40 boats were leaving each day to help clean up the spill. He was worried for his business, which includes a hotel used by competitive fisherman. “We were booked for fishing every weekend from June through August,” he said. “But this is going to devastate the fishing.”

A dead bird bathed in oil lies on the beach

That same day, the first oiled bird was found: a gannet. Tom MacKenzie, spokesman for the US Fish and Wildlife Service, said: “This is an incredibly large spill that we’re facing. It has the potential to be devastating to wildlife.” Workers brought out the greyish brown bird, wrapped tightly in a towel, and said it had been given medicine to clean out its insides. They had washed off its feathers. “This is the tripwire,” MacKenzie said. “This is the first hit.”

By the time BP’s board met to discuss the spill, on Tuesday May 4, it was clear that the mood had changed. The previous Sunday, Obama had visited Venice, the community at the southern tip of Louisiana most threatened by the oil, and warned of “a massive and potentially unprecedented environmental disaster” that “could seriously damage the economy and the environment of our Gulf states … for a long time”.

Directors were reassured, however, by the arsenal that BP planned to deploy, which it set out in lengthy presentations from Hayward and Inglis. The engineers on the third floor of the 4 Westlake building in Houston – one of the greatest collections of engineering and scientific talents ever assembled in peacetime, Hayward said – had come up with an array of possible interventions, including a “cofferdam” stop-gap (a steel container dropped over the leaking pipe), which failed; top kill; and two relief wells, already under way, that would intercept the leaking well near the reservoir.

When top kill failed on May 29, the bubbling hostility towards BP boiled over. Obama described the company’s failure to plug the leak “as enraging as it is heartbreaking”. He pledged: “We will not relent until this leak is contained, until the waters and shores are cleaned up, and until the people unjustly victimised by this man-made disaster are made whole.” In the financial markets, this was taken, rightly, as a sign that BP was going to be made to pay on a grand scale. Analysts’ estimates of the total bill rose from $10bn, to $20bn, to $40bn and beyond. BP’s shares plunged, at one point dropping 17 per cent in a single day. The price of its credit default swaps – the cost of insurance against the company not being able to pay its debts – began to rise sharply. Bankruptcy, once dismissed as an impossibility, was for the first time discussed.

In Houston, the team working to stop the leak sunk into despondency. Their temporary offices were reconfigured and a wall was removed to turn two rooms into one. There were no longer two separate groups, one working on stopping the flow, the other on capturing the escaping oil; containment was now the only game in town. On a wall used for diagrams and plans, under the heading “primary option”, someone had scrawled a large question mark on a sheet of A4.

For BP’s staff elsewhere in the world, the mood was just as grim. Shock and disbelief gave way to deep concerns about jobs and savings. Many BP staff have invested heavily in the company through employee share ownership plans. Those savings have lost roughly half their value since the accident. A former BP worker summed up the reaction: “Employees were required to take a large proportion of their total pay in shares each year and to retain them to demonstrate loyalty. There is a lot of unhappiness with the incompetence of the directors. They have turned a problem in one limited area into a global PR disaster and a crisis for the whole company.”

Hayward had made himself, in the words of the New York Daily News, “the most hated and clueless man in America”. When he was appointed, there were concerns that he was not sufficiently worldly to deal with presidents and monarchs, and he was given a crash course on knowledge he would need. Now it seemed his problem was understanding the US public.

On May 30, taking reporters along a beach to show them the clean-up effort, he apologised, forcefully and with sincerity, for the damage and disruption that the accident had caused. And then, halfway through an answer, he improvised. “No one wants this over more than I do,” he said. “I’d like my life back.” It was a slip from a man who has a tendency to indiscretion. Politically, it was disastrous.

Ironically, Hayward was eating Gulf shrimp and pasta when he had a chance encounter two days later with James Carville, his most searing critic – known as the “Ragin’ Cajun” because of his blunt Louisiana manners. Hayward, whom Carville had essentially branded a liar in one of his frequent appearances on CNN, was dining at Eleven 79, a well known restaurant in New Orleans, with the Coast Guard’s Thad Allen.

The restaurant, which serves fresh seafood from the now poisoned Gulf of Mexico, has since joined a civil suit with hundreds of other restaurants to sue BP for damages. But on that evening, Carville, who came to prominence as the manager of Bill Clinton’s 1992 presidential campaign, was less in the mood for raging than exchanging. Nursing a glass of bourbon, Carville was invited to join the men at their table.

“We kind of avoided the topic for a while,” Carville recalls. Then Hayward pointedly asked him: “What can I do to gain your trust?” Carville replied: “To be frank with you Mr Hayward, not very much.” The two then embarked on a “terse but polite” exchange about BP’s consistently poor record of underestimating the effects and scale of the spill and Hayward’s promises to do better. After about 20 minutes, they agreed to meet again in the same restaurant the same time next year to test Hayward’s promise that BP would still be there helping to clean up the mess. “I gave him some free advice and expressed my scepticism about what he was promising,” said Carville. Believing the spill will have environmental repercussions on his beloved Gulf coastline for years, if not decades, ahead, Carville now doubts the anniversary dinner will go ahead: “Looks like Hayward is on the way out,” he said. “Besides, there won’t be much fresh seafood left to serve.”

Protesters in Louisiana carry placards condemning BP

Obama, too, was being fiercely attacked: for not visiting the region often enough; for not showing he was angry; for failing to send in the US Navy. Above all, the American people wanted two things from him: to plug the well and clean up the oil. On the second, he was already doing all he could. On the first, there was nothing he could do.

What the White House could do was squeeze money out of BP. By early June it was becoming clear that that was what it was planning. BP was desperately searching for a response, and the company approached Ken Feinberg, the lawyer who had led the official US government fund for victims of the 9/11 terrorist attacks. Would he be prepared to become an independent adjudicator on claims for compensation?

The board was discussing putting BP’s dividend– the next instalment of which was to be delivered on June 21 – into an escrow account, to be released only after BP’s responsibilities to victims of the spill had been met. Directors say that the White House had not demanded a dividend cut or suspension, but given the huge cash costs facing the company it was something they were forced to consider.

Then, on June 9, Salazar dropped a bomb. Giving evidence to the Senate energy committee, he was asked about the effects of the administration’s six-month ban on deep-water drilling on oil and gas rig workers, who could lose their jobs. Would BP compensate them, he was asked? Yes, Salazar replied, the administration would make sure of it.

The statement, later confirmed by the White House, opened the ground under BP’s feet. It seemed there could be no limit to the liabilities the company would face. Even costs that were the result of government decisions, and nothing directly to do with the spill, could be piled on to BP. The company’s shares and credit-worthiness plunged further.

By then, BP engineers had fitted a containment cap to the top of the blow-out preventer – the broken stack of valves that failed in the accident – and was collecting about 15,000 bpd in a ship on the surface. But government scientists had raised their estimate of the flow from the leak yet again, to 20,000-40,000 bpd. BP was capturing only about half the oil escaping.

There was only one possible solution: BP had to talk to the White House. Hayward, America’s public enemy number one, would never be invited, but on June 10 BP chairman Carl-Henric Svanberg was summoned; the date was set for June 16. Although Svanberg had been attracting some strong criticism from shareholders in London for his hands-off attitude, it worked in his favour in Washington, where he had not been subjected to anything like the vilification meted out against Hayward. And although the position of a company pitted against a government is always a weak one, particularly in such a politically sensitive industry as energy, BP had one great asset: Obama did not have clear legal powers to force the company to pay anything.

So when Svanberg turned up at the White House, bringing with him Hayward and Bob Dudley, managing director for the Americas and Asia, among others, he was able to discuss a deal rather than take orders. In the end, BP achieved two key objectives: time to pay into the fund to compensate victims, and Feinberg appointed to adjudicate on claims. The price was $20bn. At this point, the board had been meeting several times a day, to decide how to cope with such an enormous bill. Soon after Svanberg and his team emerged from the White House, they announced their plan: suspension of the dividend, cuts in capital spending and disposals worth at least $10bn.

Svanberg appears to have soothed relations between the company and the administration. When he made a gaffe after the meeting about caring for “the small people”, he was more easily forgiven than Hayward had been. The day after the deal was announced, BP’s shares rose by more than 6 per cent. Investors began to hope that the situation had stabilised.

Hayward, meanwhile, continued on a downward spiral. The following day, he testified for seven and a half hours on Capitol Hill. Looking like he would prefer to have his teeth extracted without anaesthesia, his performance was torturous for almost everyone involved – including TV viewers. Given a choice between risking self-incrimination and infuriating lawmakers by refusing to answer questions in detail, Hayward chose the latter. His mumbling and deadpan “stonewalling” was not well received. He was accused of irresponsibility and “failing to co-operate with the committee”.

Each lawmaker strove to force Hayward to admit that BP had “cut corners” on safety procedures, but with monotonic repetition, Hayward simply referred them to the “ongoing BP investigation”. Humiliated, he returned to London, his place as the public face of BP in America taken by Dudley.

When Hayward was photographed sailing with his son off the Isle of Wight the following Saturday, he received another savaging from the US media and politicians, but by now the anger was focused largely on him, rather than the company.

Dudley, meanwhile, has been receiving some good reviews. A genial Mississippian, he has succeeded in making the emotional connection with the victims of the spill that Hayward was unable to forge. “I know what it’s like to jump off and swim off a boat in the Gulf,” Dudley told The New York Times. “I know what crabbing, shrimping and fishing is all about.”

As this magazine went to press, Hayward was still in his job, still backed by the board and some of the company’s largest shareholders. Friends and colleagues say he has a dogged sense of duty that has kept him from walking away, and that he wants to see the well shut off on his watch.

But there is a widespread expectation among shareholders, analysts, bankers and BP staff that he will step down before the end of the year, perhaps soon after the well is capped. Even as they support him for the time being, many of BP’s largest investors say that Hayward’s future ability to lead the group may have been perpetually compromised by his inept handling of the political storm in the US. “It is inevitable that Hayward will go,” one said.

If and when he does, the expectation inside and outside BP is that he will be replaced by another insider, either Dudley or Iain Conn, a polished, charming Scot with slicked-down hair who is credited with turning round BP’s American refineries, previously seen as the group’s greatest weakness. Both men were contenders for the job when Hayward was appointed early in 2007, and Dudley was his closest challenger.

The lesson that his successor might learn from Hayward’s story is that good intentions are not enough. In terms of both BP’s safety culture and its response to the spill, Hayward’s instincts, initial judgments and strategy were sound; the problem was with how they were put into effect. Putting himself at the head of BP’s effort to fight the spill was the right thing to do. But he failed in its execution.

He was also a victim of circumstances not just physical and technical, but political and psychological. A relatively young US administration and an American public still reeling from the financial crisis and recession needed a fall guy.

Though Obama’s poll ratings have not been damaged by the crisis so far, pundits in Washington still believe he has been hurt by perceived impotence over the oil spill. But the numbers have yet to bear that out.

Hayward’s legacy to his successor will be a hobbled giant. The claims for damages and the consequent labyrinth of litigation, the resentment of the American people, the anger of the administration, the doubts over BP’s competence and the drain on its cash reserves will last for many years. Hayward himself may face the threat of future possible litigation.

The company will be vulnerable to attack. An all-out takeover bid is unlikely – who would want to take on such huge and uncertain liabilities? – but BP’s rivals are circling to see which tasty pieces they may be able to bite off. Russia, which accounts for about one-quarter of the group’s production through its TNK-BP joint venture, has been a perennially sensitive region, and may well flare up again. Hayward visited Moscow this week to reassure the government that BP’s commitment to the country is undiminished.

In the US, BP’s brand is toxic, and it would be surprising if it ever recovered. Re-badging the 10,000 BP petrol stations would be a largely symbolic move: the company has already turned almost all of its sites into franchises. A more significant step, which seems increasingly likely, would be for BP to give up running new projects in the Gulf of Mexico. It could retain significant stakes there, and earn good returns, but only ever as a junior partner. Compared with the threat of being ejected from the US altogether, however, this would count as a relatively good result.

Shortly after the top kill was abandoned, Hayward reflected on what BP, and the industry, could learn from the disaster. He had been driving the message of safe operations right through the company, he said, but admitted, “it is clear that is not sufficient”. What Hayward has not accepted is that his own leadership may have contributed to BP’s failure. Huge efforts were made to improve safety, noticed by everyone who worked at BP and with it. Yet there had also been a message from the top that costs had to be cut. In February 2009, Hayward told reporters: “The mantra in BP today is ‘Every dollar counts’.”

He always insisted there need be no conflict between efficiency and safety. As one BP executive put it: “We can show we can walk and chew gum at the same time.” The focus of the investigations into the accident by Congress and others will be on whether that was true on the Deepwater Horizon.

Whatever the conclusions, BP is likely to be forced into a more cautious, diminished role. The days of its leadership on the frontier, when the company led the world going further, deeper and faster than anyone else, may be gone for good.

Edward Luce, Anna Fifield, Sheila McNulty and Kate Burgess contributed reporting to this piece

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Impact on the environment

Dead fish, seabirds weighed down by oil, endangered turtles at further risk: the signs of environmental disaster in the Gulf of Mexico following the BP blow-out are all too abundant, writes Fiona Harvey. Species affected range across the food chain, from plankton to sharks, with the unseen deaths of smaller creatures doing just as much damage. “These are vital cogs in the web of life,” says Frank Gill, president of Audubon, the US wildlife protection organisation.

Nor is it just the oil causing problems. Early on in the clean-up operation, the US Environmental Protection Agency ordered BP to change the dispersants it was using for fear that the chemicals being employed “could pose a significant threat” to marine life.

And yet – surprisingly, perhaps – the long-term effects of the disaster may be less horrific than the pictures suggest. Alaska recovered from the Exxon Valdez disaster, as did the Cornish coast from the Torrey Canyon grounding, with the spilled oil naturally dispersed and degraded over time.

Researchers are studying a way of dealing with future oil leaks by cultivating strains of oil-eating bacteria. For now, though, that remains a far-off dream.

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Overwhelming response, underwhelmed shareholders

In the first week after BP’s Deepwater Horizon rig exploded, two boats responded; 10 weeks later, that number has climbed to more than 7,000. Here are the figures that show how an accident quickly ballooned into a catastrophe for BP and the Gulf region.

Graphic by Mario Lendval and Valentina Romei

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