Audiovisual resource
Activity 6 BP oil spill
Timing: Allow 30 minutes for this activity.
Watch the videos BP Oil Spill – Tony Hayward’s Testimony Part 1 (2010–7), about the catastrophic BP oil spillage in the Gulf of Mexico in 2010. BP’s reputation and that of its executives were enormously damaged by this operational failure, particularly in the US.
Download this video clip.Video player: BP Oil Spill – Part 1
Transcript: BP Oil Spill – Part 1
Rep Bart Stupak:
Committee will come back to order. When we left off we, Mr Hayward had finished his opening statement. We’ll begin with questions. I’ll begin.
Mr Hayward, when I heard about the explosion in the Gulf, the immediate company that popped in my brain was BP. And that’s because of the last number of years from Texas City where people died and 170 people were injured, the North Slope, the problems we’ve had there. And BP’s own 2007 report on the Management Accountability Project in which it stated there was a culture that evolved over the years that seemed to ignore risk, tolerate non-compliance and accept incompetence.
So I wasn’t surprised when we heard about the explosion in the Gulf and BP was part of it. Since then, this Committee, the Oversight and Investigations Committee of the Energy and Commerce Committee, we have methodically looked at this issue. And I know you have, and your company has also.
On May 12th we had a hearing, which we looked at a number of things that went wrong. On May 25th our Committee, Chairman Waxman and myself put out a memo. It was based on BP’s preliminary report. And I’m sure you’re familiar with that report, are you not sir?
Tony Hayward:
I am.
Rep Bart Stupak:
And then on June 14th Chairman Waxman and I sent you a letter, 14 pages where we talk about the crazy well and the nightmare well.
Quite frankly BP blew it. You’ve cut corners to save money and time. And as the Chief Executive Officer of BP, as I state in my opening, you called for a leader decision-making process. You called for fewer people in the decision making process. You stated individuals need to be accountable for risk and to manage risk. Therefore, BP’s leadership managed the risk in this well. Did you manage the risk properly?
Tony Hayward:
Since I’ve been the CEO of this company I have focused on safe, reliable operations. I’ve set the tone from the top by making it very clear to everyone in BP that safe, reliable operations are our number one priority. But of course it’s about much more than words. Safety is about three things. Its about plant, it’s about people and it’s about process. In the last three years we’ve invested more than 14 billion dollars in plant integrity.
Rep Bart Stupak:
But then what happened here? I mean the June 14th letter we put out the other day, we went through five major areas. The head of the CEOs of the oil companies before this Committee Tuesday all said, you did it wrong. They never would have done a well this way. You made decisions, whether to a casing or the string with the tie-back, which everyone said the tie-back would have been safer. The lock-down sleeve, centralisers instead of doing 21 as recommended, you only do six. That defies this safety emphasis, does it not?
Tony Hayward:
We’ve launched an investigation, which we’ve shared with yourself Mr Chairman and all of your members, which has identified seven areas. It’s identified areas around cement, casing, integrity- pressure measurement, well control procedures and three areas around the blowout preventer which failed to operate.
Rep Bart Stupak:
Sure.
Tony Hayward:
That investigation is ongoing, it’s not complete.
Rep Bart Stupak:
You’re the CEO of this company. You said you were here to answer the questions of the American people. You were an exploration manager, exploration manager with BP. You were the director of BP’s exploration. You are Vice-President of BP’s exploration and production. You hold a PhD from the University of Edinburgh. Based on the May 12th hearing, the May 25th memo, our June 14th letter to you, based on all those facts, are you trying to tell me you have not reached a conclusion that BP really cut corners here?
Tony Hayward:
I think it’s too early to reach conclusions with respect, Mr Chairman. The investigations are ongoing. They’ve identified seven key areas and when they’re complete ...
Rep Bart Stupak:
Every one of those seven key areas, sir, dealt with saving time and saving money and accepting the risk. So if we use your own words, if you’re going to hold BP accountable, then we have to manage the risk. Should leadership at BP be held accountable here?
Tony Hayward:
There is no doubt that I’ve focused on safe reliable operations. We’ve made major changes in everything we do over the last three years. We’ve changed people.
Rep Bart Stupak:
What changes have you made since April 20th when the BP Deepwater Horizon exploded? What changes were made then?
Tony Hayward:
Based on what we know so far, we have made changes with respect to the testing and evaluation of blowout preventers. We’ve made changes, with respect, to ensuring that people who are likely to be dealing with well control are up-to-date and fully validated for well control procedures. And as we learn more about what happened here we will continue to make changes.
Rep Bart Stupak:
My time is just about up, and I’m trying to hold members quickly to a time because we want to get through at least one more round. Let me just ask you this.
Last five years, I’ve been up here. Your safety record, you have 26 people dead, more than 170 injured. You have the largest spill ever in Alaska. You now have the largest environmental disaster to hit the United States with no end in sight with this disaster. Do you believe the US government should continue to allow companies that have poor safety records, poor environmental records to explore minerals or oil exploration in our country? Should there be a ban on companies that have miserable safety and environmental records?
Tony Hayward:
In the three years that I’ve been CEO I’ve focused on improving dramatically our safety and environmental performance. A price of this accident that is, has indeed been the case. And that is why, amongst all the other reasons, I am so devastated by this accident.
Rep Bart Stupak:
I agree, and under your tenure you said, you had the 2007 report that was scathing of BP’s culture. You, we still have the problems with Alaska. You said you were going to hold people accountable. Who are we going to hold accountable here?
Tony Hayward:
We’ve engaged in a systematic change at BP over the last three years. We have begun to change the culture. I’m not denying that there isn’t more to do, but we have made dramatic changes in the people we have in our organisation, the skills and capabilities they have. We’ve invested heavily into that. We’ve changed significantly the processes that we use to manage our operations, and most importantly perhaps we’ve made safe, reliable operations at the core of the company. It is the thing that I talk about every time I talk internally and every time I talk externally about BP.
Rep Bart Stupak:
Sure, let’s play games … In your opening statement you said as long as you were CEO of BP, CEO of BP these things would occur. Do you expect to be CEO of BP much longer?
Tony Hayward:
I’m, at the moment I’m focused on the response. I think everyone here believes that the highest priority is to stop the leak, contain the oil on the surface and clean it up. And that is what my focus is.
Rep Bart Stupak:
Mr Burgess, your questions.
Rep Michael Burgess:
Thank you, Mr Chairman. The highest priority is stopping the leak. Let me just ask Mr Hayward, is your presence here today in any way interfering with that number one task of stopping the leak?
Tony Hayward:
It is not.
Rep Michael Burgess:
Thank you. Let me ask you another, let me just make a statement for clarification. I am not going to apologise to you. It was, after all, BP executives who were on that rig, BP executives who ultimately could have made the call to stop operations when things became unsafe. And ultimately you are the person at the top, and you are responsible. We lost 11 men on that rig, Transocean and other companies lost 11 men on that rig. I don’t feel that apologies are in order. But Mr Chairman, I do have serious questions about the set up of this fund that we heard about from the Whitehouse yesterday. And I hope this Committee will stay engaged in the oversight of that activity as well. It’s still disturbing to me that we have not had anyone from the Federal regulatory side. We’ve brought a ton of other people in here and questioned them, but really we need Mr Salazar here. We need whoever the minerals and management people were who approved that exploration plan that BP submitted that was woefully inadequate. Shame on you, Mr Hayward, for submitting it, but shame on us for accepting it with just simply a rubber stamp.
Now I’ve got some questions that I do need to ask. BP unfortunately, it’s not the first time you’ve been in front of our Committee. And in 2006, although you were not CEO, in September of that year I pulled the transcript last night and, and looked through it again. There was a big oil spill in Alaska, that had to do with not proper maintenance on the pipelines. And when you came in you said you were going to focus like a laser beam on safety. And certainly that had to be welcome news after Texas City, after the North Slope accident. So what safety briefings do you get as your office of Chief Executive Officer, and who provides them to you?
Tony Hayward:
The basis of our management of safety performance is through something that we call our Group Operating Risk Committee. It’s a Committee that I set up, I Chair. It involves the heads of all of the business streams. And ...
Rep Michael Burgess:
So it’s, so ...
Tony Hayward:
And we meet, we meet on a bi-monthly basis to review the safety performance across the company. That process is mirrored down through the company.
Rep Michael Burgess:
And what type of safety directives then, what type of directives do you issue in terms of safety as a result of those meetings? And perhaps, would you be willing to share some of that information with the Committee as we go forward?
Tony Hayward:
We can certainly share that information with the Committee. They range from changes to procedures, to requirements of, to have people where there are issues with safety to come and present to us.
Rep Michael Burgess:
But somebody records minutes during those meetings, and then your directives they come as a consequence of those briefings are written down and delivered to the appropriate managers on the ground?
Tony Hayward:
There are minutes of those meetings.
Rep Michael Burgess:
I beg your pardon?
Tony Hayward:
There are minutes of those meetings.
BP Oil Spill – Part 1
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Download this video clip.Video player: BP Oil Spill – Part 2
Transcript: BP Oil Spill – Part 2
BP Oil Spill – Part 2
Rep Donna Christensen:
You state also in your testimony that, you state in your testimony that the events of 420 were not foreseen by you. But in light of the several areas of concern that have been raised, shouldn’t someone have foreseen and be able to prevent the explosion? For example, I understand that there was supposed to be a policy where any one person on a rig can shut it down if they perceive a problem. Is this a real policy that’s enforced and reinforced in training? Or is it something just on paper because that didn’t seem to happen in this instance, even though some Transocean, some Halliburton, and even BP employees reportedly had serious concerns.
Tony Hayward:
It is a policy that is real. And if anyone at any time believes that what they’re doing is unsafe, they have both the right and the obligation to stop the task.
Rep Donna Christensen:
Are you surprised that no-one, given what we are hearing, and I know the investigation is not complete, that no-one made that decision to shut the rig down?
Tony Hayward:
I think in the light of what we now know, it is of course surprising that someone didn’t say that they were concerned. And I think that is to the heart of the investigation to understand exactly what the events were, and why there was not a, different decisions taken with respect to the events, particularly in the last five or six hours on the day of the incident.
Rep Donna Christensen:
There was a company, I think it’s, that was supposed to do the, Schlumberger, that was on the rig at the time and left. Now when we were in New Orleans, we were told in the hearing that they left because of concern for safety. But other reports said that they left because they were told they weren’t needed. What in your knowledge is the correct reason?
Tony Hayward:
I believe that the, I believe that it’s clear that they left the rig because they had completed the task. Or the task that they had anticipated to do was not required.
Rep Donna Christensen:
OK. So as far as you know it was not that they felt unsafe as we were told in New Orleans?
Tony Hayward:
It was nothing to do, I don’t believe, on the basis of anything that I have seen that it was anything to do with safety.
Rep Donna Christensen:
OK. My last question. In your testimony you say, and I’m quoting, “BP is a responsible party under the Oil Pollution Act”, and you distinguished that terminology for many implication of legal liability which is still being investigated.
You say a) do you think that you’re the sole responsible party, or might there be others and if so who?
Tony Hayward:
The government has named four responsible parties. They are BP, Transocean, Mitsui and Anadarko. They have all been named as responsible parties in this incident.
Rep Donna Christensen:
The last two were?
Tony Hayward:
Mitsui, Anadarko, Transocean and BP.
Rep Donna Christensen:
Thank you. Thank you, Mr Chairman.
Rep Bart Stupak:
Thank you, Ms Christiansen. The next for questions would be Mr Roche. He’s not here. The next would be Mr Green, for questions please.
Rep Gene Green:
Thank you Mr Chairman. Mr Hayward, yesterday Mr Tillerson from, the day before yesterday, Exxon Mobil testified Tuesday that in the aftermath of the Exxon Valdez accident, Exxon Mobil launched a full-scale, top to bottom review of their operations in implementing far-reaching actions that today guide every operating decision they make on a daily basis. Have there been any specific reforms that BP’s implemented following the Alaska pipeline accident and the Texas City refinery disaster?
Tony Hayward:
We implemented major, major change following the incidents in 2006 and 2007. We’ve implemented changes to our people, in terms of the skills and capabilities we have. We’ve implemented changes to the training that they get and the expertise that they develop. And we’ve implemented significant changes to all of our operating practices, including the implementation of an operating management system that covers all of the company’s operations. It has been a root and branch review from top to bottom.
Rep Gene Green:
I guess my concern is having followed both the Alaskan pipeline and the Texas City refinery disaster, those reforms haven’t worked. What will be done differently this time in the last almost 60 days? Has there been some discussion on why the reform from the Texas City and the pipeline, the Alaskan pipeline hasn’t worked. And again, you know the information our Committee has, you received the letter two days ago on some of the decisions were made literally on the rig by BP’s representative. What, going forward from here will we know five years from now that we won’t have to repeat what we’re doing this time?
Tony Hayward:
That is why I am so determined to get to the bottom of this incident, such that we can learn from it and make changes to ensure that it doesn’t happen again.
Rep Gene Green:
What’s happened with your drilling procedures internationally? I know there are different standards for different companies. Our Committee heard testimony from the executive a few days ago that typically Norway in the Scandinavian countries have the toughest offshore drilling. I know BP’s active in Norway. Is there a significant difference on what you do in the Gulf of Mexico, as compared to what you do off the coast of Norway, or even off the coast at Edinburgh, off the coast of Great Britain?
Tony Hayward:
We operate to the same standards globally. And the truth is that the rules and regulations, as I understand it, in the Gulf of Mexico are higher than they are, for example, in the North Sea and the UK sector, in terms of the requirements. So we will continue to learn from this incident and make changes to ensure that it cannot happen again, and it will be global.
Rep Gene Green:
Thank you Mr Chairman.
Rep Bart Stupak:
Thank you Mr Green, you yield back?
Rep Gene Green:
Yes.
Rep Bart Stupak:
Mr Green yields back, and next we turn to Mr Barton, ranking member for questions please.
Rep Joe Barton:
Thank you, Chairman Stupak. I appreciate the opportunity to ask some questions. Mr Hayward, yesterday when we had a hearing in a different subcommittee of this full Committee, we had four CEOs of other oil companies. I think, to a person, and I could be wrong about this, but I think they all indicated that they either would not have drilled this well, or at least would not have drilled it the way BP drilled it. What’s your response to that?
Tony Hayward:
I want to understand exactly what happened through our investigation. To compare it with other practices to determine what is the truth. And I can’t comment today on that.
Rep Joe Barton:
All right. I have had off camera discussions with a number of experts in the drilling processes for the deep Gulf of Mexico, and they all say that BP has a different culture. That there is, for example, in most of the other companies that operate in the deep Gulf, there are a number of individuals on site that have what is called Stop Order Authority. In other words, if they see something that’s going on that comprises safety or integrity, they have the ability to stop production. But I’m told that BP doesn’t give that authority, that it is further up the chain of command. Is that correct? And if so, is that something that BP may consider changing given what’s happened?
Tony Hayward:
On a drilling operation such as this anyone can stop it. The BP men, the Transocean driller, the Transocean tool pusher, the IEM or the BP well site leader. It requires everyone to agree to continue. And if there is one person who does not agree then they do not continue.
Rep Joe Barton:
So when I’m told that the BP culture in terms of this authority is different I’ve been told incorrectly?
Tony Hayward:
I believe that’s so, Congressman.
Rep Joe Barton:
In terms of the two relief wells that are currently being drilled, are they being drilled using the same procedures as this well, or are they being drilled differently? In other words, some of the things that weren’t used on this well, the double casing, things of this sort are those relief wells going to use these enhanced safety procedures?
Tony Hayward:
There are clearly some areas of concern, as we have identified in our investigation – cement casing and the relief wells are being drilled with all of those issues absolutely foremost in the procedure. Now clearly, the relief wells are rather different because of what they have to do. But all of the things that we have learnt to date from our investigation have absolutely been incorporated into the activity that is taking place with respect to the relief wells.
Rep Joe Barton:
Have you either read, or been at least given a summary of, the letter that Chairman Waxman and Chairman Stupak said earlier in the week that lists the five or six outstanding or what they consider, what the staff consider to be the anomalies in this well, and the safety concerns. Are you familiar with that?
Tony Hayward:
I am familiar with that letter.
Rep Joe Barton:
OK. Do you agree in general with the concerns that are raised there about the lack of a, for the lack of a better term, of a safety collar being employed, the number of devices that could have stopped the oil and gas venting and escaping up the well. It was recommended, somebody recommended, I think, 21 or 22, and BP made a decision to only use six. Do you, now that you know what’s happened, do you share some of the concerns that that letter raises?
Tony Hayward:
I think I share the concern about there are a number of contributory factors that may have, that have created this incident. They’re focused on the cement, on the casing, on the integrity test, on the well control procedures, and on the complete failure of the blowout preventer. And they are all areas that I believe we all need to understand fully before we draw conclusions about how this accident occurred.
BP Oil Spill – Part 2
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Download this video clip.Video player: BP Oil Spill – Part 3
Transcript: BP Oil Spill – Part 3
BP Oil Spill – Part 3
Rep Lois Capps:
Mr Hayward, your 20 billion dollars of compensation fund is a good first step. But it’s just the beginning. You’re going to have to fully compensate everyone who has been affected by this disaster.
This week BP announced the first instalment of a 25 million dollar fund within a broader 500 million dollar commitment to the Gulf of Mexico Research Initiative. Is BP still committed to putting the full 500 million, not just the 25 instalment, but the full 500 million towards this initiative?
Tony Hayward:
We are. It’s an initiative that will take place we believe over 10 years.
Rep Lois Capps:
When will we see the details of this entire programme?
Tony Hayward:
It’s being worked by the experts currently. We think it’s important to have a programme that has firm scientific foundation ...
Rep Lois Capps:
Are, are these your experts sir?
Tony Hayward:
No, these are not our experts. These are independent scientists drawn across the United States, from some of the ...
Rep Lois Capps:
I would request that you would submit to the Committee the list of experts that you have that are developing this programme. I would appreciate that.
Tony Hayward:
We’d be very happy to do that.
Rep Lois Capps:
Will there be further scientific investments that you will make available to the research community, significant, further investments of dollars?
Tony Hayward:
Well we’ve set up a 500 million dollar initial fund, and I think we need to see what the scientists determine.
Rep Lois Capps:
All right. I just mentioned this because your commitment pales into comparison to the one billion dollar Exxon spent on the Valdez spill 20 years ago, which was in quite a bit more remote location and fewer people apparently were impacted by that one.
So you are going to make all the data from this research available to the public?
Tony Hayward:
It will be fully open and transparent. It won’t be BP’s data, it’ll be the data of the scientists involved.
Rep Lois Capps:
All right, with their names attached?
Tony Hayward:
Absolutely.
Rep Lois Capps:
I want to switch topics now. The federal government has developed training classes to provide the necessary training for workers and volunteers who are cleaning up the oil from your spills. But we continue to see reports that BP is not following the training guidelines, endangering further the health of these workers now and long into the future. Why are we still hearing these kinds of reports from the people who are out on the water and on the shoreline?
Tony Hayward:
We’re doing everything we can to train everyone involved in this, as well and as clearly and as properly as we can.
Rep Lois Capps:
Are you using the federal developed courses?
Tony Hayward:
we’re using OSHA Guidelines to establish what is the appropriate training.
Rep Lois Capps:
Finally, I want to ask you about BP’s Response Plan, which was clearly inadequate. This Committee learned this week that the other major oil companies relied on the same Response Plans that are practically identical to your own. The same contractors seem to have written your plan and their plans. They hired the same contractors apparently as you did. And you all appeared to have the same technical experts and the very same response commitment.
Now if this spill had happened to a different oil company do you have any reason to think that they would have responded more effectively than BP has?
Tony Hayward:
I can’t really comment on that. All I can say is that we have initiated the biggest spill response in the history, not only of America, but of the world. It involves thousands of vessels, 35,000 people. It is the largest activity of its kind ever conducted.
Rep Lois Capps:
I appreciate that. The federal government of this country has also initiated the largest response that we have ever initiated on behalf of any kind of natural disaster or man-made disaster in the history of this country as well.
But finally, back to my original question on that topic. Rex Tillerson, the CEO of Exxon Mobil, was asked the same question that I just asked you. He said that Exxon, his own company, is not prepared to deal with a large spill if it happens to them. He also said that the response capability to prevent the impacts of a spill doesn’t exist.
Now bear in mind, this is the same response training manual, response manual that your company has in, with respect to his own, he says the impacts of a spill the capability does not exist, and probably never will.
My question to you, do you agree with Mr Tillerson about this?
Tony Hayward:
Well, I agree that it’s, there aren’t many missings in our ability to respond to an incident of this type. And there will be many learnings to be had from this incident, and how we can build better response capability in the future.
And, as I said, we are doing an extraordinary spill response, and I regret that it hasn’t been more successful so far than any of us would want.
Rep Lois Capps:
I yield back, Mr Chairman.
Chairman:
Thank you, Ms Capps. Mr Gonzalez, your questions please.
Rep Charles Gonzalez:
Thank you very much, Mr Chairman. Mr Hayward, let me ask you, there’s a six month moratorium on deep water drilling. Do you think that’s reasonable under the circumstances?
Tony Hayward:
I think it’s important that the lessons from this are learnt, and clearly that’s a decision for the authorities to take, not for me. But it’s clearly important that ...
Rep Charles Gonzalez:
On no, I’m not asking you to make the decision, I’m just asking your own opinion based on your expertise and your position. I would assume you would have an opinion of whether that’s a prudent thing to be doing?
Tony Hayward:
I believe it is prudent for the industry to take stock of what has happened here before it moves forwards.
Rep Charles Gonzalez:
Well, you know, there are calls to move expeditiously to lift that ban after accomplishing whatever is supposed to be accomplished in order to give people peace of mind, that is, we drill we’re not going to have a recurrence. So when do you think it would be appropriate to consider lifting the moratorium?
Tony Hayward:
I don’t think I can make a judgement on that today. I,I think ...
Rep Charles Gonzalez:
What would common sense tell you?
Tony Hayward:
I think when we understood clearly what had happened and understood clearly what better response is required in the event that something like this ever happened again.
Rep Charles Gonzalez:
I think, I’m hoping everybody is going to be on that same page because it’s fundamentally sound. Now we’ve had other members that made reference to the hearing we had a couple of days ago, and I’m sure you’ve already spoken to Mr McCain and such, but Shell, Exxon, Chevron, ConocoPhillips, they all said.
Now I will tell you this though when I asked them if they could me a 100 per cent assurance that nothing like this would happen when they’re drilling in deep water they wouldn’t give me it. What they would say is, we do it safely, we do it safely. Human experience is that there are no 100 per cent assurances about any activity. And all I was trying to get is, let’s be honest with the American people, that there’s risk. There’s risk. There’s risk. And it’s calculated risk. And if we can provide enough assurances that it’s a risk worth taking, then we’ll be out there won’t we.
Well they wouldn’t do that, believe it or not, and I’m hoping that you won’t play that same game. But what they did say is, it would never have happened because their manner and fashion of drilling is different than what you were doing.
I don’t want to start a big war among you guys, but do you really believe that the way they explore and drill in deep water is substantially different than what you were doing out there?
Tony Hayward:
Not to my knowledge.
Rep Charles Gonzalez:
I tend to agree with you. So let’s talk about planning. And I think Ms Capps pointed out something that’s really important as far as with Exxon. What he actually said was, we couldn’t deal with it if something like that happened. Which is an incredible statement to make, isn’t it, the fact that you’re willing to expose that kind of risk, and if a worse case scenario did develop you wouldn’t know what to do?
So let’s go back to 2003. The Society of Petroleum Engineers and the International Association of Drilling Contractors reported, quote “No blow-out has yet occurred in ultra deep water, water depths of 5,000 feet or greater. But statistics show it is likely to happen. Are we ready to handle it?” Well, we know the answer is no, but at that time they said it was likely to happen. Have you ever read anything like that in all these years that it was likely to happen?
Tony Hayward:
I haven’t read that article I’m afraid.
Rep Charles Gonzalez:
Did you believe it was likely to happen?
Tony Hayward:
I did not believe it was likely to happen. It was a risk that was identified as the highest risk by BP across the Corporation. It was a risk that was identified by, as the highest risk by our Exploration and Production Unit. And we believed that the risk mitigant was the so called failsafe mechanism of the blow-out preventer.
BP Oil Spill – Part 3
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What do you think were the immediate and long-term financial consequences to BP of this episode? You may want to note down and save your thoughts in the note box provided below.
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Answer
The direct costs to BP of the oil spill in 2010 relate to the repair work and the cleaning up of the Gulf of Mexico. Additionally, BP faced fines for the spillage and claims for compensation from organisations – particularly marine organisations – whose business was adversely affected by the disaster. How far BP will be able to offset these direct costs, estimated as being of the order of $40 billion to $60 billion, by sharing the financial burden with its contractors or insurers is currently unclear.
Read more in this news story [Tip: hold Ctrl and click a link to open it in a new tab. (Hide tip)] .
One immediate impact was a fall in BP’s share price from 650 pence in March 2010 to 300 pence in June 2010 – although subsequently the share price has recovered and stands (in January 2012) at 476 pence. Clearly this means that raising finance through equity issues would be more costly to BP now than in early 2010, before the spillage. Additionally, the cut in BP’s credit rating by the credit rating agency Standard & Poor’s would have slightly increased the cost of borrowing money from the financial markets.
Over the longer term it will be interesting to see the impact of the reputational damage to BP on its business – particularly in the US and especially in its retailing operations (i.e. petrol stations). As consumers become increasingly environmentally conscious, BP may suffer over the medium-term in the same way that the oil company Exxon did after its oil spill in Alaska in 1989.