Two employees of BP face manslaughter charges over the Gulf of Mexico spill, as the oil giant agrees to pay a record £2.8bn fine.
Legal papers allege that well site leaders Robert Kaluza and Donald Vidrine acted negligently in their supervision of key safety tests performed on the Deepwater Horizon drilling rig before an explosion killed 11 workers in April 2010.
David Rainey, who was BP’s vice president of exploration for the Gulf of Mexico, also faces charges of obstruction of Congress and false statements.
Earlier on Thursday, BP agreed to pay £2.8bn over six years after reaching a deal with the United States Department of Justice (DoJ) and the Securities and Exchange Commission (SEC).
The company will plead guilty to 14 criminal charges relating to the disaster.
“I want to be clear that today’s resolution does mark the end of our efforts, and our criminal investigation remains ongoing,” US Attorney General Eric Holder told reporters.
Bob Dudley, chief executive of BP, said: “We apologise for our role in the accident and as today’s resolution with the US government further reflects, we have accepted responsibility for our actions.”
Under the deal, BP has pleaded guilty to 11 felony counts of misconduct or neglect and three misdemeanour counts – including one under the Clean Water Act and one for obstructing Congress.
BP will pay £2.5bn to the DoJ in instalments over five years. It will pay an additional £331m to the SEC over a period of three years.
The oil company will make the first payment of £110m to the SEC this year.
The group has already paid out more than £24bn relating to the oil spill.
Mr Dudley said: “All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf Coast region.”
He added: “Since the spill, we have worked hard to rebuild confidence in the company.
“We take seriously not only our commitment to safety and operational excellence but also our communications with stakeholders, including the public, the government and our investors.”
The settlement removes some of the uncertainty hanging over the stock since the disaster, but it does not cover outstanding civil claims against the group.
BP said it will “continue to vigorously defend itself” against civil claims and allegations of gross negligence.
“We are open to settlements, but only on reasonable terms,” said Mr Dudley.
The settlement does not include individual civil claims or any compensation sought from individual states along the Gulf Coast.
BP said, as part of the settlement, it had agreed to improve safety at its Gulf of Mexico drilling operations and appoint two monitors to review safety and ethics at the company.
The group has struggled to repair its reputation after the Deepwater explosion, despite paying out billions of dollars so far to cover costs and claims.
It has been selling assets as part of its pledge to raise cash to pay the costs of the Gulf of Mexico disaster.
It has recently sold a Texas City refinery, five oil and gas fields in the US Gulf of Mexico and its Bristol-based liquified petroleum gas (LPG) distribution arm.
Tony Hayward in line for multimillion windfall after Iraq oil deal
Hayward, who quit BP 14 months ago following the Deepwater Horizon disaster, will be chief executive of Genel Energy PLC, which has oil reserves in Kurdistan (sic.)
Former BP chief executive Tony Hayward is in line for a windfall after his investment vehicle signed a deal with Turkey's Genel. Photograph: Toby Melville/REUTERS
Tony Hayward has sealed a deal to exploit the oil fields of Iraq’s Kurdistan region, landing the former BP boss an expected windfall of around £14m.
Hayward’s return to the oil industry was finalised on Wednesday as his new investment vehicle, called Vallares, agreed a merger with Genel Energy International of Turkey. The deal will deliver an estimated £176m windfall for Hayward and his fellow backers of Vallares, including Nat Rothschild.
Hayward said the deal would allow Vallares to exploit “one of the last great frontiers in the oil and gas industry”.
“Arguably, it [Kurdistan (sic.)] is the last big onshore ‘easy’ oil province available for exploration by private companies anywhere in the world,” he added.
The combined company will be named Genel Energy PLC, and aims to join the FTSE 100 by early 2012.
Hayward, who quit BP 14 months ago following the Deepwater Horizon disaster, will be chief executive of the combined company, sealing his return to the ranks of major oil firm bosses. On a conference call with reporters he refused to discuss how the transformation of his fortunes over the last year contrasted with the ongoing struggle faced by those affected by the oil spill in the Gulf of Mexico.
Genel holds proved and probable reserves of 356m barrels of oil. It is well-placed to tap Kurdistan’s (sic.) huge reserves of hydrocarbons, with an estimated 40bn barrels of oil still to be discovered. Hayward compared the region’s potential to that of the North Sea.
Vallares will issue $2.1bn (£1.3bn) worth of new shares, and use the proceeds to buy Genel in a 50:50 merger that will see the Turkish firm merge with Vallares and take its share listing through a “reverse takeover”.
Vallares was created by Hayward, Rothschild and two other businessmen earlier this year, raising £1.35bn through a stock market flotation.
Under the terms in which Vallares was created, the four co-founders will share a windfall worth 6.67% of the group’s value once it has completed its first major deal, in return for injecting a total £100m at its creation. That means the quartet will share around £170m, depending on their original stakes. The split of the £100m was not made public, but Hayward reportedly contributed £8m.
Mehmet Sepil, the current CEO of Genel, was hit with a record fine of almost £1m for insider trading in February 2010. The Financial Services Authority imposed the penalty after Sepil, and two colleagues, bought shares in Heritage Oil following confidential test results that revealed that Heritage and Genel had made a major oil discovery. Sepil insisted that he had not realised that this breached insider dealing rules.
Sepil will become president of the new company, but will not serve on its board. Some analysts have questioned whether, given this fine, Genel would have been allowed to list in London with Sepil at the helm.
City grandee Rodney Chase will chair the company. He insisted on Wednesday that Genel Energy will show “total adherence” to City rules. Chase added that the merger with Genel showed that companies from around the world could be attracted to list in London.
www.guardian.co.uk, 7 September 2011
[2]
The City forgives trespasses – perhaps too readily when money talks
Only months after Tony Hayward’s near-death experience at BP, he’s back in the oil business
Julia Finch
Tony Hayward is in effect using his name in the City to give cover to a chief executive who was fined £1m by the FSA. Photograph: Win Mcnamee/Getty Images
The City is a forgiving place for those with an aptitude for making money – and losing it. Tony Hayward is set to march back into leadership with a London-listed oil company only months after presiding over a near-death experience for BP.
The Vallares investment vehicle that Hayward recently established with his financier friend Nat Rothschild has merged with Kurdistan (sic.) oil explorer Genel Energy International of Turkey. Hayward will bring it to market under the Genel name via an initial public offering making paper profits for himself and Rothschild of many millions of pounds each.
But Hayward is, in effect, using his name in the City to give cover to Genel’s chief executive, Mehmet Sepil. The Turkish businessman was fined nearly £1m by the UK’s Financial Services Authority for insider dealing around an earlier potential – but ultimately unsuccessful – merger of Genel with London-listed Heritage Oil.
Sepil would probably find it very difficult to bring his company to market himself, so he needs a fine local name to front his business – especially as Genel could soon end up in the FTSE 100 group of leading companies and therefore be automatically included in many workers’ pension funds.
Outsiders might think that Hayward is not an obvious choice. BP has sold tens of billions of pounds’ worth of assets to pay for the cost of potential liabilities in the aftermath of the Gulf of Mexico blowout. Shares in the company continue to trade some 30% below where they were before the accident 18 months ago and speculation continues that it may need to break itself up to create new value.
Clearly, Hayward cannot be held solely responsible for the Macondo oilwell disaster. The facts suggest there were very many different parties who played a role.
But still – like the bankers who have largely got off scot-free in the UK despite blowing up the financial system – it adds to a feeling that the City’s willingness to forgive is inappropriate, if not irresponsible. And it adds to the sense of a race to the bottom among stock markets keen to pull in petro-dollar businesses without much regard for corporate social responsibility.
About five million barrels of oil spilled into the Gulf of Mexico
US energy services giant Halliburton is suing BP for defamation and negligent misrepresentation over the disastrous 2010 oil spill in the Gulf of Mexico.
Halliburton claims BP gave inaccurate information to the US company before it did work lining the well with cement.
An official inquiry found that faulty cementing contributed to the disaster, which killed 11 oil rig workers.
BP said it was aware of the lawsuit and, should it come to court, they would “vigorously contest the claims”.
The amount of damages Halliburton is seeking has not been disclosed.
‘Diverting attention’
Halliburton said in a statement that it has “filed claims against BP in Texas state court for negligent misrepresentation, business disparagement and defamation” related to the Deepwater Horizon disaster.
“Halliburton has learned that BP provided Halliburton inaccurate information about the actual location of hydrocarbon zones in the well.
“The actual location of the hydrocarbon zones is critical information required prior to performing cementing services and is necessary to achieve desired cement placement,” Halliburton said.
“Halliburton remains confident that all the work it performed… was completed in accordance with BP’s specifications for its well construction plan and instructions, and that Halliburton is fully indemnified under the contract,” the company said.
But BP said: “We believe this lawsuit is the latest attempt by Halliburton to divert attention from its role in the Deepwater Horizon tragedy and its failure to meet its responsibilities, and to deflect all blame to BP.
“Investigations published so far have concluded that multiple parties contributed to the incident, including Halliburton.
“We have accepted responsibility for our role in the disaster, and are paying costs and compensation. In contrast Halliburton has refused to take any responsibility or accountability at all.”
Some 4.9 million barrels of oil had gushed out of the runaway underwater well before the leak was capped, causing severe environmental damage in the Gulf of Mexico.
Greg Muttitt: ‘Big oil firms are still in the driving seat when it comes to the resource war’
This week, The Independent revealed how big oil firms influenced the invasion of Iraq. Greg Muttitt, who uncovered the story, exposes the lengths to which the occupying powers went to prise the country’s oil production out of the control of the Iraqi government and into the hands of international oil companies.
Interview by Phil England
I would say the most surprising thing about my book is that someone else hasn’t written it in the past eight years. It’s an obvious question to ask, ‘what happened to the oil?’ ”
Published yesterday, Greg Muttitt’s explosive new history of post-occupation Iraq has been pulled together from hundreds of documents released under the Freedom of Information act – both here and in the US – as well as from numerous first-hand interviews. Muttitt was the source of The Independent’s front-page revelations on Tuesday that both BP and Shell had meetings with government officials in the run-up to the invasion of Iraq.
With more revelations inside, his book is set to turn our understanding of the war on its head. As well as documenting just how highly oil figured in the thinking of those who led what is widely thought to have been an illegal invasion, Fuel on the Fire exposes the lengths to which the occupying powers went to prise the country’s oil production out of the control of the Iraqi government, and into the hands of international oil companies, against the wishes of the Iraqi people.
It’s an absorbing account of what is a much more complex story than many pundits might prefer. “I didn’t feel it would be helpful to just chuck ammunition to one side in a polarised debate,” he explains. “I wanted to explore how this really works. I think it’s important to understand the nature of a resource war in the 21st century.”
For many years Muttitt worked as a researcher and campaigner on the social and environmental impacts of the oil industry as a co-director of campaign group Platform, and in recent weeks he has been appointed campaigns and policy director for War on Want. After eight years of piecing this all together, including three visits to Iraq and several visits to Jordan, Muttitt is confident about some of his core findings. “Oil was the most important strategic interest behind the war and it shaped the decisions of the occupying powers,” he tells me. “The primary strategic interest for the US and Britain is to have a low and stable oil price. A secondary interest is for their own corporations to do well.”
Bringing international oil companies back into Iraq, after 30 years of nationalised production, would put the country at odds with neighbouring producers such as Saudi Arabia, Kuwait and Iran, whose oil production has also been in the public sector since the 1970s. Part of the strategy seems to have been about changing that political culture.
“In some of the documents I got hold of for the book it becomes quite clear,” says Muttitt. “The British government talks about using Iraq as a strong exemplar for the region and the International Tax and Investment Centre – the oil companies’ lobbying organisation – even described it as a beach-head for broader expansion of the oil companies into the Middle East.”
One of the great achievements of Muttitt’s book is to have restored an Iraqi voice to a narrative from which it had largely been erased. The fact that the Iraqi people held a strong view that oil production should stay in their hands did not deter the occupying powers and international oil companies from pursuing their privatisation agenda relentlessly. But at some point it all had to come unstuck. At the heart of Fuel on the Fire is the story of the Iraqi peoples’ fight against the Oil Law – a law which would have removed the need for parliamentary approval of contracts with oil companies.
It was a fight in which Muttitt himself played a role. At a meeting with Iraqi unions in Amman in Jordan in 2006, following his work on a report called Crude Designs, he helped make the law’s implications accessible. Although initiated by the unions, the two-year campaign which followed was joined by oil experts, religious and civil society groups, intellectuals and professionals.
Iraq’s own oil experts, who had worked in the industry for decades, made the case against foreign investment. As Muttitt notes: “The industry was at its most effective in the 1970s immediately after nationalisation and before Saddam took the country into a series of wars.”
Despite all the pressure brought to bear on the Iraqi government from outside the country – including aid and debt relief being made conditional on passing an oil law, direct briefings by oil companies, linking the surge strategy to passage of the oil law, and a threat to remove Prime Minister Nouri al-Maliki from office – the campaign proved too popular for parliament to pass the law.
You might think that was enough to force a rethink, but the Iraqi government went ahead and auctioned off 60 per cent of the country’s proven reserves anyway, under contracts of dubious legality, to companies such as BP, Shell and Exxon. In what was the biggest sell-off in the history of oil, some analysts believe the financial returns for the oil companies will be 20 per cent or more.
Iraqi MP Shatha al-Musawi attempted to bring a legal case against the first contract: BP’s joint deal with the China National Petroleum Corporation for the Rumaila field. But the Supreme Court said this would cost her $250,000. Her fellow parliamentarians were supportive and promised to help raise the money, but that commitment fell apart as parties jostled for position after the March 2010 elections. After she decided not to re-stand for election, al-Musawi told Muttitt: “Most of the governing institutions are working without law and violating the constitution every day because they decided not to have an effective parliament. We really have a dictatorship.”
Muttitt worries about the lack of effective political oversight at a time of massive outside investment in Iraq’s oil resources. Studies of the “resource curse”, including the World Bank’s Extractive Industries Review show that effective governance is needed before you bring in tens of millions of dollars. “Unless you manage it effectively you get a distortion of the economy, you get corruption and you get investors that don’t serve national interests.”
The Iraqi street worries about it, too. On 25 February people across the country protested against corruption and for better services in a “day of rage” where a number of people were killed by security forces. The slogans included: “The people’s oil is for the people not the thieves.” Sami Ramadani, a London-based Iraqi exile who writes regularly about the occupation, told me: “The general feeling is that Iraq’s oil is being given away and whatever is being retained in terms of income is being squandered by the regime. In terms of services, wherever you turn there is a very sharp deterioration – health, education, employment, clean water and so on.”
The legitimacy of the post-Saddam regime is coming increasingly into question. After a “million person march” against the occupation led by the Sadrists on 9 April in Baghdad (Ramadani estimates the turnout was in the hundreds of thousands), a new military order was issued that decrees that demonstrations can only take place within designated football fields. One demonstrator who defied the ban one week later quipped: “Are we going to play a football match with the police?”
Last week oil minister Abdul-Karim al-Luaibi announced another auction, this time for 12 “exploration and production” contracts, which are expected to go under the hammer in November. “Iraq has the greatest unexplored potential of any country in the world,” says Muttitt. “Most geologists reckon there’s about as much still to be found as currently exists in proven reserves. So this would tie up another chunk of Iraq’s future economic potential for 20-30 years.”
This is on top of the massive planned increase in production from 2.5 million barrels per day to 12 million bpd, already implied by the existing contracts. Even the small number of Iraqi oil experts who supported privatisation are now arguing that such a rapid increase is not in Iraq’s interest as it will likely lead to a crash of the oil price.
Muttitt says the government has been very effective in breaking organised opposition to the oil law. “The oil workers trade union still exists [although, like all trade unions in Iraq, is illegal] but has come under enormous pressure. The large group of oil experts that opposed the oil law, meanwhile, have been co-opted and broken apart. A lot of them have been offered very lucrative roles with multinationals and so on.”
Nevertheless, he still has faith in ordinary Iraqis to deal with their problems. After all, it was civil society that won the fight against the oil law and it was a coalition of civil society groups that forced Iraq’s politicians to finally form a government after five months of post-election wrangling last December. “This struggle is not over and there is hope for the future. If Iraqi civil society is given the chance and the right kind of international support, these issues are still up for being contested. In spite of the politicians, there is cause for hope in Iraq.”
“Fuel on the Fire: Oil and Politics in Occupied Iraq” by Greg Muttitt is published by The Bodley Head
www.independent.co.uk, 22 April 2011
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John Hawkins 4 days ago
Oil is the primary resource in the world today, those who complain about oil company actions would soon change their tune if they could not fill their car tanks every week.
tomfrom66 3 days ago in reply to John Hawkins
They would also complain if there was no artificial fertilizer – Haber Bosch process – to put food on their tables, and no plastics.
They might also – if the facts were put in front of them – be very afraid of what life is going to be like when oil becomes to so prohibitively expensive it cannot ‘fund’ all three aspects of the economy.
Oil is not some self-replicating substance, John.
John Hawkins 3 days ago in reply to tomfrom66
“Oil is not some self-replicating substance”
I agree Tom and did not intend to suggest oil could be used profligately, just that it is the ultimate essential to our present lifestyle.
For good or bad, bad in my view, we have put ourselves in the hands of oil producers and bankers.
A Deepwater Horizon rig worker has told the BBC that he identified a leak in the oil rig’s safety equipment weeks before the explosion.
Tyrone Benton said the leak was not fixed at the time, but that instead the faulty device was shut down and a second one relied on.
BP said rig owners Transocean were responsible for the operation and maintenance of that piece of equipment.
Transocean said it tested the device successfully before the accident.
Meanwhile, BP has said that its costs in tackling the disaster have now risen to $2bn (£1.34bn).
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‘Unacceptable
On 20 April, when the Deepwater Horizon rig exploded killing 11 people, the blowout preventer, as the device is known, failed.
The most critical piece of safety equipment on the rig, they are designed to avert disasters just like the oil spill in the Gulf of Mexico.
The blowout preventer (BOP) has giant shears which are designed to cut and seal off the well’s main pipe. The control pods are effectively the brains of the blowout preventer and contain both electronics and hydraulics. This is where Mr Benton said the problem was found.
“We saw a leak on the pod, so by seeing the leak we informed the company men,” Mr Benton said of the earlier problem he had identified. “They have a control room where they could turn off that pod and turn on the other one, so that they don’t have to stop production.”
Professor Tad Patzek, petroleum expert at the University of Texas, was blunt in his assessment: “That is unacceptable. If you see any evidence of the blowout preventer not functioning properly, you should fix it by whatever means possible.”
Mr Benton said his supervisor e-mailed both BP and Transocean about the leaks when they were discovered.
Daily costs
He said he did not know whether the leaking pod was turned back on before the disaster or not.
He said to repair the control pod would have meant temporarily stopping drilling work on the rig at at time when it was costing BP $500,000 (£337,000) a day to operate the Deepwater Horizon.
Henry Waxman, a House of Representatives Democrat who is overseeing congressional investigations into the rig disaster, has accused BP of taking safety shortcuts to save money.
“BP appears to have made multiple decisions for economic reasons that increased the danger of a catastrophic well failure,” Mr Waxman said.
BP chief executive Tony Hayward, giving evidence to Congress, said: “There is nothing I have seen in the evidence so far that suggests that anyone put cost ahead of safety, if there are then we will take action.”
Congress has identified numerous other problems with the blowout preventer, including design problems, unexpected modifications and a flat battery.
Cement job
The other major problems on the rig, Congress has said, centred around the cement job. Cement in an oil well blocks explosive gases from escaping, and it appears the cement may not have set properly on the Deepwater Horizon.
BP said it had indications of a successful cementing operation and the company that was in charge of the cement job, Halliburton, has said it was consistent with that used in similar applications.
Several rig workers the BBC spoke to who were on the Deepwater Horizon said there was pressure in April to work fast.
Work to prepare and then seal the well was behind schedule and had to be completed before a production rig could move in and start turning profits.
“Too many jobs were being done at one time. It should have just really slowed down and just took one job at a time, to make sure everything was done the way it should have been,” said Mr Benton, who is now suing BP and Transocean for negligence.
BP has responded to Mr Benton’s account saying Transocean was responsible for both the maintenance and operation of the blowout preventer.
Oil giant BP is fighting to secure its future as the US government has launched a criminal and civil investigation into the Gulf of Mexico oil spill.
US Attorney General Eric Holder announced the probe into the disaster after the oil giant suffered its biggest one-day shares fall for 18 years.
Shares plunged by as much as 17 per cent at one stage on Tuesday, before settling around 13 per cent lower. That wiped £12 billion off its market value.
The stock tumbled into the red after BP’s latest attempts to block the leaking oil well proved unsuccessful and amid mounting fears over the ultimate financial toll on the company.
Launching the investigation which will involve the FBI, Mr Holder said: “We will closely examine the actions of those involved in the spill. If we find evidence of illegal behaviour, we will be extremely forceful in our response.”
Though he would not specify which companies or individuals might be targeted, BP’s actions are expected to come under intense scrutiny.
One analyst said the relentless oil leak – the worst in US history – has the potential to “break BP” if the well is not brought under control soon.
BP’s “top kill” operation to cap the well with mud and other debris proved unsuccessful over the weekend and the company is now working on using robot submarines in the latest move to stem the flow of oil.
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