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Triple Crunch Log                                                                                                            

Centralizers. When the final string of casing was installed, one key challenge was making sure the casing ran down the center of the well bore. As the American Petroleum Institute’s recommended practices explain, if the casing is not centered, “it is difficult, if not impossible, to displace mud effectively from the narrow side of the annulus,” resulting in a failed cement job. Halliburton, the contractor hired by BP to cement the well, warned BP that the well could have a “SEVERE gas flow problem” if BP lowered the final string of casing with only six centralizers instead of the 21 recommended by Halliburton. BP rejected Halliburton’s advice to use additional centralizers. In an e-mail on April 16, a BP official involved in the decision explained: “it will take 10 hours to install them . … I do not like this.” Later that day, another official recognized the risks of proceeding with insufficient centralizers but commented: “who cares, it’s done, end of story, will probably be fine.”

Cement Bond Log. BP’s mid-April plan review predicted cement failure, stating “Cement simulations indicate it is unlikely to be a successful cement job due to formation breakdown.” Despite this warning and Halliburton’s prediction of severe gas flow problems, BP did not run a 9- to 12-hour procedure called a cement bond log to assess the integrity of the cement seal. BP had a crew from Schlumberger on the rig on the morning of April 20 for the purpose of running a cement bond log, but they departed after BP told them their services were not needed. An independent expert consulted by the Committee called this decision “horribly negligent. ”

Mud Circulation. In exploratory operations like the Macondo well, wells are generally filled with weighted mud during the drilling process. The American Petroleum Institute (API) recommends that oil companies fully circulate the drilling mud in the well from the bottom to the top before commencing the cementing process. Circulating the mud in the Macondo well could have taken as long as 12 hours, but it would have allowed workers on the rig to test the mud for gas influxes, to safely remove any pockets of gas, and to eliminate debris and condition the mud so as to prevent contamination of the cement. BP decided to forego this safety step and conduct only a partial circulation of the drilling mud before the cement job.

Lockdown Sleeve. Because BP elected to use just a single string of casing, the Macondo well had just two barriers to gas flow up the annular space around the final string of casing: the cement at the bottom of the well and the seal at the wellhead on the sea floor. The decision to use insufficient centralizers created a significant risk that the cement job would channel and fail, while the decision not to run a cement bond log denied BP the opportunity to assess the status of the cement job. These decisions would appear to make it crucial to ensure the integrity of the seal assembly that was the remaining barrier against an influx of hydrocarbons. Yet, BP did not deploy the casing hanger lockdown sleeve that would have prevented the seal from being blown out from below.”475

Oil company bosses testify that they could not have contained spill any better then BP – but Exxon, Chevron, ConocoPhillips and Shell all tell the house energy and commerce committee that they operate to a higher safety standard than BP. Rex Tillerson, chairman and chief executive of Exxon: “When these things happen we are not very well equipped to handle them. There is no response capability that will guarantee you will never have an impact. It does not exist.” He and others say they would have stopped drilling when confronted with the problems in well control. “This incident represents a dramatic departure from industry norms in deepwater drilling. We do not proceed with operations if we cannot do so safely.” Like BP in its so-called disaster plan, the companies listed the phone number of a long-dead marine scientist and raised concerns about protecting walruses – not found in the gulf for the past 3 million years. Ed Markey, chairman of the subcommittee on global warming: “The only technology you seem to be relying upon is a Xerox machine to put together your response plans.”476

16.6.10.

BP agrees to suspend dividend and back $20bn spill fund after meeting with Obama. “This is not a cap,” Obama says.  The account is an escrow over 4 years with the first $5bn to be paid this year.477

Congressman suggests drilling relief wells at the same time as exploration wells. Rex Tillerson, Exxon CEO, says that would just be doubling risk. And cost of course. “This is an exploration well so it means you’re drilling in an area that’s not previously been drilled before. If you look at the history of well control problems and blowouts, most of them have occurred on the way down to the objective, not once they reach their objective. They’re caused by shallow gas hazards, they’re caused by unknown pore pressures on the way down to the objective, so if you have two wells going down at the same time it means you have just increase your risk of having a problem on the way down to them.” FT Energy Source: “So what does this mean for relief wells, then? And about risk management of deepwater drilling more generally?”478

George Osborn abolishes the FSA and hands the regulatory keys to the Bank of England. Mervyn King describes his new role, beyond the Bank’s normal monetary policy, as being to “turn down the music when the dancing gets a little too wild”. The transition will take two years. He also sets up and Independent Banking Commission to report by September 2011.479

E&Y to be investigated for its role in approval of Lehman’s hiding of debt. UK accountancy regulator how it could have allowed the bank to hide $50bn off its books. One industry expert describes the development as the “tip of the iceberg”, to be followed by a potential flood of legal claims against E&Y. Just like the ratings agencies, the paying of audit firms for an opinion seems to be fatally flawed, when clients can always move to a firm with a more favourable view.480 Nils Pratley: “Perhaps we can proceed to the wider debate about how auditors are paid. At the moment, auditors are paid by the company – the people they are meant to be policing. That seems a straightforward conflict of interest. Plenty of alternative models have been suggested. It's time they were properly examined.”481

17.6.10. Tony Hayward inflames Congress by emulating Ronald Reagan in not recalling. He uses multiple versions of “I don’t recall,” and “I wasn’t involved in the decisionmaking”, insisting that all verdicts have to await the outcome of BP’s own enquiry. He is told he should quit, mocked for his $6bn salary, and asked to consider whether a firm with a safety record like BP's should be banned from America. “With respect sir, we drill hundreds of wells around the world,” he says along the way. “That's what's scaring me now,” replies Michael Burgess, a Texas Republican. Members read out emails from BP engineers pointing to a disaster waiting to unfold, and others over-riding concerns, including one scarcely-credible message: “Who cares, it's done, end of story, will probably be fine.” Waxman: “It appears to me BP knowingly risked well failure to save a few million dollars.” Joe Barton, a Texas Republican, says he is ashamed BP was compelled to agree to pay $20bn into an independently managed fund for victims of the spill. “I apologise. I do not want to live in a country where every time a corporation does something wrong, it's subject to a political process that amounts to a

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