BP's report on the cause of the deadly Deepwater Horizon explosion and subsequent oil spill in the Gulf of Mexico provides a glimpse into what future litigation will look like -- and it's not because the company is taking some responsibility for the accident. On the contrary -- and in spite of the numerous media reports this morning that say otherwise -- BP is not sharing the blame, at least not equally so. Instead, BP has rather coyly pointed the most damning fingers at its contractors Halliburton (HAL) and Transocean (RIG) without coming across as company trying to avoid any of the blame.
In short, the 193-page report concludes there wasn't one single factor that caused the disaster, but rather a complex series of failures that includes mechanical, engineering, operational missteps as well as poor human judgment. The internal investigation describes eight factors that led to the accident, the most legally damaging of which falls to Halliburton, the company responsible for the cementing job, and Transocean, the rig owner and operator.
Outgoing CEO Tony Hayward's statement sums up the investigation with this biting blow to both Halliburton and Transocean.
To put it simply, there was a bad cement job and a failure of the show track barrier at the bottom of the well, which let hydrocarbons from the reservoir into the production casing. The negative pressure test was accepted when it should not have been, there were failures in well control procedures and in the blow-out preventer; and the rig's fire and gas system did not prevent ignition.BP goes as far as blaming its workers on the rig saying they misread test results and failed to spot signs of gas flow prior to the explosion. The report also says both BP and Halliburton employees should have spotted problems with the cement job. But far more importantly, at least in legal terms, the report exonerates BP for its own much-criticized single casing well design and its decision to use six centralizers, not the recommended 21, when cementing the well.
Based on the report, it would appear unlikely that the well design contributed to the incident, as the investigation found that the hydrocarbons flowed up the production casing through the bottom of the well.
The report, known as the Bly report after Mark Bly, BP's chief of safety, doesn't take BP completely off the liability hook. But that's the intention. An internal BP report that blames every other company except itself would have been discredited immediately. And the blame it does take is cast onto a few employees, not the entire company.
Of course, the blame battle and investigations have only just begun. The blow-out preventer, perhaps the most critical piece of evidence to determining what happened, was seized last week by U.S. officials. Information gathered from an examination of the BOP will play a major role in any lawsuit against BP.