Page last updated at 18:08 GMT, Friday, 30 April 2010 19:08 UK

Messy blame game could follow US oil spill

By Jorn Madslien
Business reporter, BBC News

US Coast Guard photo showing the arm of a robot submarine attempting to activate a shutoff device known as a blowout preventer (BOP) to close off the flow of oil at the Deepwater Horizon well head
Investigators will seek to determine why the blowout preventer failed to shut off the flow of oil from the well.

BP has seen its reputation hammered and the value of its shares plunge after an explosion that damaged and sank the Deepwater Horizon oil rig in the Gulf of Mexico.

The accident may have cost 11 workers their lives, yet it is not the explosion and its deadly consequences that have caused such widespread concern and anger.

Instead, it seems that people are most worried about the subsequent massive leak from the oil well which the rig had been drilling into.

Some 5,000 barrels (210,000 gallons) of oil per day is gushing into the sea off the coast of Louisiana, threatening vast devastation to the nearby marine life and coastal industries.

Double whammy

It was never meant to happen.

The explosion, which industry observers believe was caused by a pressure "kick" from the well that pushed natural gas up to the platform, came after the failure of a mechanism that was supposed to have been automatically activated to prevent the gas leak.

Evidently, that did not happen.

So it seems clear that much attention will be given to Deepwater Horizon's so-called "blowout preventer", which was also supposed to have cut off the flow of oil from the well - similar to the way water mains can be cut off in the event of a leaking pipe in the home.

The blowout preventer was clearly faulty. Indeed, it seems efforts to close it manually - with the help of underwater robots - have also failed.

So two things have happened here.

Firstly, there was an explosion, which should not have taken place.

And then there there was the apparent failure in the planned response to the accident, namely the prevention of the leak.

Shared blame?

So who should be blamed?

On a public image level, BP cannot afford to be seen to be passing the buck
Robert Perkins, energy expert, Platts

For starters, BP (along with its partners in the project, Anadarko and Mitsui, which own 25% and 10% of the licence respectively) is clearly going to have to cover the costs involved in stopping the leak and in cleaning up the mess.

And industry observers do not expect the UK-based company to step away from its responsibilities.

But Transocean - the world's largest offshore drilling contractor, which owns and operates the rig on behalf of BP - may also be blamed, as might Cameron International - the company that manufactured the blowout preventer in 2001.

"The arguments about liability are going to be a right mess," predicts Robert Perkins of energy expert, Platts.

Once the emergency in the Gulf of Mexico is over, investigators will move in to try and determine exactly what went wrong.

Next, the lawyers will examine their findings to determine who should be blamed for what.

Flexible partners

The predictably messy aftermath will be an indication of how the oil industry operates.

Though oil majors such as BP are at the helm of the exploration and extraction industry, they never carry out all of the work themselves.

Oil services companies, such as Transocean, do much on its behalf and it is not always clear who should be blamed when things go wrong.

Indeed, large oil companies contract out jobs for a number of reasons.

Oil services companies tend to possess specialist knowledge and equipment, whether they are dedicated to exploration, to production, to transportation, or to repairs and maintenance.

They also offer the oil majors some local expertise - or they deliver the local input that is often required by governments eager to harness economic benefits from exploration or production activities by foreign companies.

And they share the economic risk of projects. Typically, during periods of low oil prices the oil majors cut back on exploration projects, leaving their suppliers idle.

In return, the same companies know to up their charges during periods when demand for their services is high - not least because they will have to set aside money to invest in cost-saving technologies to remain competitive.

But although the oil services companies often get paid to take on financial risk, they will rarely be left with overall project responsibilities.

During times of crisis, it is not an option for the likes of BP to simply walk away, believes Mr Perkins.

"On a public image level, BP cannot afford to be seen to be passing the buck."



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