Saturday, 7 January 2012

BP takes legal action against Halliburton over Deepwater Horizon disaster.

On 20 April 2010 an explosion aboard the oil-rig Deepwater Horizon killed 11 men working on the rig and injured 17 more. The explosion was caused by a well-head blowout (an uncontrolled release of oil from a well, after the failure of a pressure system) that left oil gushing into the waters of the Gulf of Mexico at a rate of about 62 000 barrels per day (9.86 million liters per day).

Fire in the aftermath of the explosion aboard the Deepwater Horizon.

It took until 15 July for engineers to cap the well, during which time the well released approximately 4 900 000 barrels (779 000 000 liters) of oil into the Gulf (the amount being released per day fell during this period, due to the reservoir feeding the well becoming depleted) making this the largest ever accidental oil spill.

The Deepwater Horizon was operated by the offshore drilling contractor Transocean on behalf of BP, the license holder of the Macondo Prospect oilfield, off the coast of Louisiana, on which the rig operated.

The resultant oil spill covered a large area of the Gulf, and lead to oil slicks washing up along much of the US Gulf Coast, severely effecting local industries, particularly shrimping and tourism, and having a devastating effect on the Gulf's environment.

Map of the extent of the Gulf oil spill over time; the darkest areas, being covered by oil for the longest time (16-18 weeks), the lightest for under three weeks. Image from the European Space Agency.

Since the disaster BP has been forced to pay out US$27.1 billion in costs, a bill which is expected to rise to about US$42 billion. This has been criticized as inadequate by environmental groups, who have suggested both that the amount is insufficient, and that it is wrong for BP to be able to offset the expense against tax.

This week news emerged that BP is brining legal action in a New Orleans Federal Court against Texas-based oilfield services contractor Halliburton, who fitted the well-head that blew, for the total cost of the cleanup operation. Halliburton are fighting the claim on the basis that its contract required BP to indemnify it against all damage claims; an argument that BP rejects on the grounds that Halliburton were 'grossly negligent'.

The move is an unusual one, as the oil industry does not usually like its practices subject to the level of public scrutiny that comes with high-profile court cases, and therefore ends to avoid such cases. BP has already reached an out of court settlement with Transocean worth $250 000 000.

Oil cleanup workers on a beach in Alabama.

As oil reserves have run low oil companies have began to explore more remote and hard to access areas, such as the deep seas and the Arctic Ocean. At the same time many large companies (not just in the oil industry) have been accused by environmental and safety campaigners of developing a culture of cost cutting at the expense of employee safety and environmental protection, often with the apparent consent of national politicians. After the Gulf spill a Commission set up by the Obama Administration found that there had been almost no safety regime aboard the Deepwater Horizon, and that money had been a factor in this.

All of which makes the willingness of both parties to risk a court action, with the risk of increased public scrutiny of practices both aboard the Deepwater Horizon and in the wider industry, not to mention substantial legal costs, is even more remarkable. It is clear that neither party considers the expenses arising from the incident to be bearable. In the light of which it is to be hoped that in future there will be a wider appreciation of the benefit of preventative, rather than remedial, measures within the wider oil industry.

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