When BP announced late on Sunday its decision to shut down its Alaskan oil field, it cited the discovery of “unexpectedly severe corrosion’’.
Yet whistleblowers have complained for years about how budget cuts have left the field with insufficient staff, poor maintenance and widespread corrosion.
Although BP shares ownership of the field with ExxonMobil and Conoco-Phillips, as operator, BP has been responsible for upkeep of the 38-year-old Prudhoe Bay, North America’s largest oil field.
Concerns about BP’s record have been building for at least seven years. The FT has obtained e-mails dating back to 1999, documenting a BP union representative raising with management concerns over staff ability to respond to critical events and monitoring given the increase in workloads.
Several even complained before Congress in 2002. And a well explosion that severely injured a worker and the death of a contract worker in a separate accident that year led more people to come out as whistleblowers.
Throughout, BP has insisted its operations were adequately funded, corrosion was properly monitored and safety of the workers and environment was key.
It was not until the biggest-ever oil spill at the field from a corroded pipeline in March, however, that regulators tightened the noose around BP and demanded it determine the true condition of the field.
“They were playing Russian roulette with the facility and the flow lines,
jeopardising the safety of the workers and threatening the environment,’’ said Chuck Hamel, a conduit for the BP whistleblowers.
Last week, the Department of Transportation, which regulates the pipelines, issued BP a warning to comply with its corrective action order, after the company missed a key deadline to complete corrosion cleaning and tests on its pipelines. The DoT noted it could not only fine BP a maximum $10m but refer BP’s failure to co-operate to the attorney- general for civil enforcement.
BP insisted its own tests had showed the lines were not overly corroded and that sludge build-up, from letting the high-tech “pigging’’ maintenance cleaning lapse as long as 16 years in some cases, was not as severe as it had originally thought.
“The degree of inconsistency with BP’s earlier estimates is reason alone for a cautious approach,’’ warned Thomas Barrett, head of the DoT’s Pipeline and Hazardous Materials Safety Administration, in a letter to John Dingell, senior Democrat on the House committee on energy and commerce, who has been out front in monitoring BP. The FT obtained a copy of that letter.
Last week, BP received the results of those pigging tests while Lord Browne, BP’s chief executive, was at Prudhoe Bay to show local media how well-maintained the field was.
The tests revealed “16 anomalies in 12 locations in an oil transit line’’, with corrosion so bad that pushing the high-tech equipment through even forced a spill. And that was on a separate line from the one that burst in March, spilling 270,000 gallons of oil.
“It is appalling that BP let this critical pipeline deteriorate to the point that a major production shutdown was necessary,” Mr Dingell said. “BP must take all steps necessary to repair or replace problem pipelines quickly, so the American consumer does not pay for BP’s laxity.’’
He called on Congress to “hold hearings to determine what broke down here and what laws and regulations need to be improved to ensure problem pipelines like these are found and fixed earlier”.
With a grand jury probing the March leak and other whistleblower complaints for possible criminal action against BP in Alaska, and the DoT’s growing impatience, the UK company was forced to act.
Despite having only tested 40 per cent of BP’s 22 miles of pipeline on the Alaska field, BP decided to shut down the entire field. One person close to the management in Alaska said executives as senior as Steven Marshall, head of BP’s Alaska operations, and Lord Browne, were “totally spooked’’ by the situation.
Analysts and energy executives said BP’s reaction was more drastic than it would have been before the string of bad news from the US. Barclays Capital said: “Given the recent record, there is clearly a lot of sensitivity within BP management over its record in Alaska, and the sensitivity may be reflected in a heightened degree of caution over the latest findings.’’
- Largest oilfield in North America
- About 8 per cent of total US oil production
- About 9 per cent of BP’s US oil and gas production
- About 2.5 per cent of all BP’s oil and gas production
- Ownership: BP (operator): c.26 per cent; ConocoPhillips: c.36 per cent; ExxonMobil: c.36 per cent; others: c.2 per cent