Review Spills and Spin: The Inside Story of BP

On 20 April 2010, BP's Deepwater Horizon oil rig caught fire and sank, killing 11 men. It was the start of the biggest environmental disaster in US history, one that would devastate the Gulf coastline and almost ruin BP as a company. Tom Bergin's new book, Spills and Spin: The Inside Story of BP', chronicles the road to the disaster from the start of John Browne's tenure as CEO in 1995 - and tells the equally compelling story of the company's response. It should be required reading for all investors, and indeed for anyone with a passing interest in the murky world of Big Oil. Bergin's book is accessible, lively and utterly compelling - something akin to watching a car crash in slow motion. For anyone who followed the financial crisis, it evokes a strange sense of dj vu. Bergin's story is one of short-term profiteering, reckless risk-taking and lax regulation and of the perverse incentives which meant nobody had an interest in stopping the juggernaut before it crashed. Sound familiar? Under Browne's regime of slashing costs and cutting corners, where managers had no incentive to spend money fixing problems which would come home to roost long after they'd moved on, Bergin argues that BP became "a carefully constructed time bomb". He shows in meticulous detail how a disregard for process safety led directly to both the Texas City blast in 2005, and the deepwater disaster six years later. Of course, hindsight is a wonderful thing, but it really is difficult to imagine how anyone could have failed to see the warning signs. Yet throughout this period, the ticking of the time bomb was drowned out by investors' willingness to cheerlead BP's strategy: applauding Browne's management prowess, and then, when the flaws in his approach were finally recognised after Texas City, uncritically accepting claims that safety was improving under Tony Hayward. Yet, as Bergin points out, if analysts had probed the evidence for these claims they would have found that the emperor had no clothes. So why didn't they? Bergin hints at the answer: fund managers and analysts operate under exactly the same short-term incentives that prevailed in BP itself. They had no more incentive to pay attention to safety than BP managers did. Indeed, even as the crisis played out - and Bergin shows just how close BP came to going bust during this time - analysts were still cheerfully issuing buy recommendations and insisting that the company was fundamentally sound. It's a shame Bergin doesn't devote more attention to BP's 2010 AGM, where many of these issues were played out in microcosm. The shareholder resolution on BP's tar sands operations gets only a passing mention, yet many of the issues it raised were precisely those at play in offshore drilling: unproven technology, management of safety risks, oversight of contractors.

The level of support it generated supports Bergin's contention that most investors were unconcerned about these things. But the company's reaction to those investors who did engage was equally telling. The overwhelming message was trust us': investors were asked to have faith that management knew what they were doing. Most of them were only too happy to oblige. If Bergin's book shows us one thing, it's that such blind trust in company management can be a costly mistake. The lesson of Deepwater is that general company statements - be it on improving safety or tackling climate change - should not simply be taken at face value. Investors need to challenge, probe and demand real evidence of improvement. In other words, they need to cut through the spin. For some unknown reason I had always thought of BP as the least bad oil company. Then they spilt nearly five million barrels of oil into the Gulf of Mexico. Then I read Spills and Spin. Tom Bergins first book, which begins with thick mud raining onto the deck of an offshore supply vessel in the Gulf of Mexico, chronicles the thirty years of BP history leading up to the spill. As such, it is as much page-turning thriller as it is an historical account. Bergin neatly weaves company history into the drama of the days and weeks following the worst oil spill in history and keeps you gripped at every stage. Bergins unique position as a trusted Reuters journalist who had access to top BP executives could have limited his ability to comment critically on the company, but this certainly doesnt seem to be the case. Spills and Spin digs deep into the shady history of the worlds fourth biggest company and documents BPs history of cost cutting, outsourcing and reckless risk-taking. Bergin rejects the commonly held view that Paul Heywood, the companys CEO at the time of the deepwater disaster, was a scapegoat for the mistakes of others. Instead, the story Bergin uncovers is one of deeply ingrained myopia within BPs senior management which has led to years of appalling laxity around health, safety and environmental protection. One telling example is that BP, unlike other oil majors in The Gulf, only monitored its oil platforms during office hours, which proved particularly useless when the crisis began to unfold after 9 oclock at night. The further Bergin explores BPs governance over the last few decades the more surprising it becomes that a disaster on the scale of Deepwater hadnt happened sooner. Brand BP Beyond petroleum sums up our brand in the most succinct and focused way possible. Its both what we stand for and a practical description of what we do- BP Website At the same time as cutting corners in health and safety, investing in oil derivatives and promoting short-termism amongst their staff, BP also built a powerful PR machine. As a result,

to the outside world it seemed that BP were the first oil company to take climate change seriously. Bergin argues that the company saw its green branding as a necessary piece of external communications rather than anything concrete. For instance, after an announcement, in 2005, that it would invest $8bn in alternative energy, BP went on to plough most of this money into gas power hardly a move away from fossil fuels. Bergin leaves no doubt in the minds of his readers that we have been sold a lie by BP on their attitude to climate change, but it was only after the Deepwater spill that the PR machine began to break down and those who had been converted were able to finally see the company for what it really was. Bergin merges his expertise in energy companies with a sensitivity that youd hardly expect from a journalist working for the wires. When BP fail to plug the leak at Deepwater you can feel Bergins anger, disappointment and ultimate sadness at whats going on. This book is not revolutionary. It doesnt directly challenge the hegemony of big oil companies or suggest solutions for the future, but it doesnt pretend to either. It is a fantastically well-written investigation into a company that has used its powerful brand to cover up a reprehensible attitude to its workers and the planets well-being. Though Spills and Spin suggests that BP is the worst offender there is no doubt that an equally revealing book could be written about the shortcomings of Shell or Chevron. One can only hope that there are more journalists like Tom Bergin out there who can expose these hugely influential companies for the increasing danger that they pose to our future. Tom Bergin has written a compelling tale of a company, British Petroleum, who sacrificed the safety of its own people, its stakeholders and the environment for the sake of a robust bottom line. While the thrust of this book, like all stories, can never be purely objective, Bergin certainly was in a position to know the story more fully than anyone else, being the head of Reuters resource and energy sector coverage and personally managing coverage of BP for years. Bergin ultimately tells the tale of how the Gulf spill happened and the events leading up to it, but he is not satisfied with examining a few weeks ahead of the disaster. Bergin's story, and BP's, begins decades earlier. Bergin traces the history of BP, particularly when John Browne was at the helm and then afterwards, when he handed the reigns to his former `turtles'. Bergin exposes a history of cost cutting, stop-gap or misdirected safety measures, and expensive green-washing PR and media messaging campaigns, to convince shareholders, regulators and the general public that BP was the operator of choice. Bergin argues that BP's long-time operating model, conceived of and implemented from the very top down, of rewarding its top executives for their business unit's ability to run with lean and shrinking budgets in order to maximize profits, ultimately led to multiple large-scale disasters such as the Texas City refinery explosion and the Prudhoe Bay,

Alaska oil spill. When BP effectively made no real changes to its operating model after these events, it should have set off huge warning alarms for everyone concerned. Bergin convincingly argues for a systemic flaw in BP's operating model, one that put maximizing profits ahead of people and the environment. In the author's opinion, the `Macondo' spill in the Gulf was not an unforeseeable freak accident but merely a matter of time. And it's very hard to argue with his conclusion. `Spills and Spin' ought to be required reading for energy company executives and regulators as well as shareholders who desire to see their money wisely and not just profitably invested.