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Daily Telegraph: Reports blame BP cuts and complacency for oil spillage

By Russell Hotten
Last Updated: 2:23am BST 10/05/2007

Two reports into the causes of a huge oil spillage at BP operations in Alaska blame the company’s cost-cutting and management culture for the accident.

The reports, commissioned by BP, echo criticism of the company after an explosion at its Texas City refinery in 2005 which led the company to set aside £1bn in compensation.

A US Congressional Committee is reviewing the reports as part of an investigation into the March 2006 spillage at Prudhoe Bay, in which at least 200,000 gallons of oil leaked onto the tundra. According to the Reuters news agency, a source in Congress said the reports talk of “top-down cost-cutting…without any risk analysis”.

One report, by specialist engineer CC Technologies, said BP’s maintenance practices, especially a failure regularly to flush out sediment inside a pipeline, allowed corrosion to take hold.

The second report, by consultancy Booz Allen Hamilton, criticises BP management standards and complacency toward possible corrosion. According to the Reuters source, the report “is pretty comprehensive. It recommends a lot of changes to the way BP manages its business here and the way it thinks about risks”.

BP did not deny the existence of the reports, but no one was available to comment further.

BP has begun overhauling its US management structure to improve operational controls. New chief executive of the US business Bob Malone has been given more control of the operations and has appointed managers who are to ensure operating units comply with BP’s corporate policies.

The company has recruited a Royal Dutch Shell refinery manager to run Texas City and has also replaced several top officials at BP Alaska.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/10/cnbp10.xml

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