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>BP faces ban on future American operations

June 6, 2010

AMERICAN legislators are examining plans to “debar” BP from government contracts and oil exploration deals as punishment for the Gulf of Mexico oil spill.

The proposal comes amid frantic attempts by the Obama administration to quell public anger over the British company’s role in the worst oil spill in the country’s history.

The administration is understood to be weighing the legality of a process called debarment. It would stop BP from being awarded new fuel supply contracts by government clients and ban it from being granted new oil drilling leases.

BP is the biggest provider of oil and gas to the US military, with contracts worth more than $2 billion (£1.4 billion)annually. “The question for the American government is whether they want to break this company. They could do, but at what cost to the economy?” one Washington source said yesterday.

The disclosure came as the oil giant made its first breakthrough after seven weeks of faltering attempts to contain oil gushing from the ruptured undersea well 40 miles off the coast of Louisiana.

The company said yesterday that a pipe it fastened over the well had siphoned 6,000 barrels of oil up to a ship over a 24-hour period. The well is releasing up to 19,000 barrels a day, according to government estimates.

Tony Hayward, BP’s embattled chief executive, said the company hoped to increase the amount over the next couple of days so that the “majority” of the escaping oil is caught.

In an interview with The Sunday Times, he refused to blame BP personnel for the disaster. “Seven things went wrong,” he said. “The cement that seals the well failed, the casing failed, the pressure tests failed, the procedures to detect gas in the well failed, the activation of the blowout preventer [a subsea failsafe device] failed, the automatic preventer trigger failed, and the features in the preventer allowing us to activate it later failed.”

He said there was “absolutely no evidence” that the spill was a reflection of a poor safety culture within BP, or that $3 billion of cost cuts he has made were to blame.

“The costs were taken out of corporate functions. Since I took over we have actually added to operations. We are 30%-40% better than the industry average [safety ranking] in the Gulf of Mexico,” he said. “I don’t think anyone would dispute that.”

President Barack Obama last week increased pressure for BP to suspend its dividend until the pollution from the spill is cleaned up, warning the group not to “nickel and dime” local communities while handing out billions to investors.

Carl-Henric Svanberg, the chairman, told investors on Friday that a decision on the next payout would not be made until next month.

BP pointed out that it has $15 billion in cash and debt at its disposal and generated $30 billion cashflow in the last quarter, giving it “significant flexibility to deal with the costs of this incident”.

http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article7144839.ece