Baron Browne of Madingley is back in business in the Gulf of Mexico.
And that’s terrible news.
John Browne, as he is better known, is managing director of Riverstone Holdings, a private equity firm that recently paid $3.75 billion for 2 million acres of oil and gas assets along Louisiana’s coast. According to a July 18 press release, Riverstone acquired “the largest operated asset base on the Gulf of Mexico Shelf.”
Before Riverstone, Browne headed BP, from 1995 to 2007. There, he transformed what was a staid British firm into a global energy giant. He grew the firm by acquiring other companies, such as Amoco, and cut costs to boost returns. The stock markets loved him. He relished the high-level competition and pursued oil fields with the biggest potential, like those in the deepwater Gulf of Mexico. That’s how BP suddenly went from a bit player to the Gulf’s largest oil producer and acreage-holder.
Browne denied that cost-cutting directives led to the tragedy, and repeatedly claimed his executives never refused to authorize expenditures for safety purposes.
In short, Browne molded BP into the company it was in 2010, when the Deepwater Horizon platform exploded, killing 11, and BP’s Macondo well unleashed the largest offshore oil spill in history.
So pardon us if we don’t roll out the welcome mat for Browne’s return to the Gulf. Business growth is wonderful, but not at the expense of occupational and environmental safety.
Louisianans are more familiar with Browne’s successor, Tony Hayward, who became the unfortunate face of BP’s oil spill in 2010. During the crisis, Hayward painfully demonstrated his lack of aplomb at public relations. After numerous gaffes — such as the infamous “I want my life back” — Hayward was replaced by Bob Dudley, a BP executive from Hattiesburg.
What many don’t know is that Hayward and Dudley were both proteges of Browne. They had been groomed for the BP fast track. Browne called them his “Turtles” — a reference to the Teenage Mutant Ninja Turtles cartoon series from the 1980s. Browne’s Turtles received higher pay and were poised to inherit the Turtle Bible, a collection of Browne’s secret advice.
Considering the many accidents which occurred during Browne’s tenure, one can’t help wondering if the Turtle Bible was missing a gospel on the importance of sound safety practices and ways to develop a corporate culture that valued them.
1) The 2005 Texas City Refinery explosion makes for a revealing case study in this regard. The following summary of the tragedy is compiled from “Failure to Learn: The BP Texas City Refinery Disaster,” written by Andrew Hopkins, an occupational safety expert:
BP had acquired the refinery from Amoco in 1999 and immediately challenged operators to slash costs by a whopping 25 percent. One manager objected to the cuts and was effectively demoted. The others got the message, and hiring freezes were followed by layoffs. The refinery’s training staff shrunk from 28 to eight.
The facility was highly profitable — it cleared nearly $1 billion in 2004, the most of any BP refinery — but the bean counters weren’t impressed. They wanted a higher percentage yield on their capital inflows. So, to improve returns, BP reduced investment in the facility, and it became woefully under-maintained.
On March 23, 2005, antiquated distillation columns at Texas City were grossly overfilled with hydrocarbons. No flares had been installed on top of the columns to burn off vapor, so a flammable cloud poured over the facility. (Not for the first time, either.) Control room operators who had worked 12-hour shifts for 29 days straight were slow to react. The cloud ignited and a huge explosion killed 15 employees and injured 170 more.
An analysis of the disaster cited by Hopkins found that “the prevailing culture at the Texas City Refinery was to accept cost reductions without challenge and not to raise concerns when operational integrity was compromised.” (It seems they were taking their cues from the top.) Depositions from other investigations recapped by Hopkins included a BP vice-president saying Browne showed “no passion, no curiosity, no interest” whenever the topic of safety was introduced.
Browne denied that cost-cutting directives led to the tragedy, and repeatedly claimed his executives never refused to authorize expenditures for safety purposes. Left unsaid was that specific safety requests never reached top brass, because those requests had already been subsumed within broader spending categories (fitted to suit the bottom line, no doubt.) So Browne’s talking point was a meaningless evasion.
Business columnist Loren Steffy described the epilogue to the Texas City disaster in his book “Drowning in Oil: BP and the Reckless Pursuit of Profit”:
Despite BP’s frequent public statements about its commitment to safety, workers and contractors grumbled that inside the refinery, little was changing. Just two months after the blast, refinery managers knowingly operated an ultraformer unit with thinning and eroding pipes for three days, acknowledging that doing so was ‘a serious safety risk.’ It was the same ultraformer that had been the site of the explosions in March 2004 that resulted in the $63,000 OSHA fine. Those explosions, too, had resulted from thinning pipes. Four months after the March 2005 explosion, another blast rocked the Texas City plant. This one was far less severe, and no one was killed …
That such risk-taking was allowed, or even possible, four months after a catastrophic accident should make your blood boil. (That is, unless you enjoy a workplace that resembles a ticking time bomb.) BP paid record fines but didn’t seem to learn from their mistakes.
2) BP’s Thunder Horse debacle was an example of a near miss. The $5 billion oil platform was the largest in the world at the time. It was supposed to be BP’s tour de force. Situated over deep wells, it was projected to single-handedly account for one-fifth of the Gulf’s total oil output. But costly delays led to missed deadlines. Work was hurried, and inspections were rushed. Two huge oversights occurred: One-way valves had been installed backwards, and multiple bad welding jobs had compromised the facility’s sub-sea manifold.
These defects rendered “Blunder Horse,” as critics later called it, a massive oil spill waiting to happen. A senior engineering consultant on the project later said, “It could have been a helluva spill — much like the Deepwater Horizon.” However— luckily?— in the aftermath of 2005’s Hurricane Dennis the 15-story platform nearly sank (because of the valve error) before it went into operation. When BP repaired the platform, it discovered the corners that were cut during final assembly.
3) In March 2006 BP pipelines in Alaska led to the largest ever spill on the North Slope. The culprit? Corroded pipes that hadn’t been inspected. Five months later, it happened again.
One thing will stay the same, though. Browne will take the risks, and profits and glory, while the people of Louisiana and state’s shoreline bear the brunt if something goes wrong.
Those weren’t the only safety incidents during Browne’s reign. All told, they are alarming symptoms of a corporate culture with a startling disregard for safety. Of course, after each incident, BP claimed it had learned its lessons. They assured regulators that safety was always a top priority … yadda yadda. They paid fines, settled lawsuits and pleaded guilty to environmental violations (when necessary). Then the next incident would occur, and the all-too-familiar charade would begin again.
Interestingly Browne wasn’t sacked for any of the myriad and massive safety failures on his watch. Instead he suddenly quit in May 2007 when it was revealed he lied to conceal that he met his boyfriend through an escort service web site.
It’s unclear whether the Turtles remaining in place after Browne’s ouster will fundamentally shift the BP corporate culture he created. Hayward sometimes criticized Browne’s “more for less” mantra and instituted some changes. But the magnitude of the Deepwater Horizon disaster, and Hayward’s pathetic performance afterwards, made it hard to be sure. As for current CEO Dudley, only time will tell.
It would be big news if Hayward returned to the Gulf in any capacity. But Browne’s return has received little if any local press. I see ample cause for alarm.
First, Riverstone often partners on deals with the Carlyle Group, the private equity behemoth, long known for its insider connections and secrecy. Carlyle’s deep pockets will allow Browne to go on an acquisition spree at Riverstone, just like he did at BP.
Riverstone’s founders recruited Browne in 2007 because they thought his name would be a “big draw for U.S. and European pension funds.” Well, apparently Browne’s name recognition isn’t always enough to carry the day. For example, in 2009 Riverstone (and Carlyle) had to pay a $30 million fine to the state of New York for involvement in a “pay for play” scheme to secure investments in Riverstone by state pension funds.
Riverstone’s latest deal in the Gulf is also perplexing. The Barrell blog notes a strange twist: Browne’s firm is acquiring shallow water fields that BP owned years ago, but sold in order to concentrate on larger deepwater plays.
It raises a larger question: What do the adventurous Browne and his high-powered cohorts see in these shallow fields, anyway? Surely they didn’t invest $4 billion just to squeeze the last few drops of oil from played out wells that have been in service for decades.
According to Oil and Gas Journal, the Riverstone gang is interested in “high-potential deep hydrocarbon plays” that lie under the mostly depleted shallow-water oil reserves. The idea (as I understand it) is to drill past the exploited fields relatively near the surface, and go down to 30,000-plus feet to find new untapped “subsalt” hydrocarbons.
In other words, Browne wants to swing for the fences: drill to ultra-deep reservoirs in search of the mammoth hydrocarbon payoff. Feels just like old times. (Except that now, the drilling will be done much closer to the Louisiana coast.)
I suppose we have to hope that Browne has learned from his past mistakes, and will make safety a higher priority. One thing will stay the same, though. Browne will take the risks, and profits and glory, while the people of Louisiana and state’s shoreline bear the brunt if something goes wrong.
