BP: The Shining

BP flashback:

Mr. Hayward has prided himself on improving the company's safety record, while cutting 5,000 jobs last year and $4bn of costs this year. The oil giant outshone its bigger rival, Royal Dutch Shell, this week when it announced profits far exceeding analyst expectations.

BP's Texas City refinery exploded due to a "misplaced culture of safety," driven by cost cutting from Hayward's predecessor, Lord John Browne. Browne gave deposition regarding the 15 Texas City deaths:

Q: And the third dot says, "Reduce business unit cash cost for the year 2001 by at least 25 percent from the year 1998 levels." Do you see that, sir?

Browne: I do.

Q. And, in fact, that was a request or a mandate that came from London as part of the merger and acquisition of Amoco, isn't it, sir?

Browne: I don't believe that's what this piece of paper says, and it wasn't actually done this way. I believe these are the downstream strategies and goals, not the group goals.

Q. Okay. Were you aware of any orders going to any of the refineries in the United States after the merger to cut their operational cost 25 percent?

Browne: No, I wasn't, not in detail at all.

Q. Okay. Have you ever been provided with any of the lists of what the various individual refineries were doing in response to requests to reduce their budget after the merger?

Browne: Not to my knowledge. I can't remember seeing such a list.

Q. Okay. Were you ever made aware of what BP Texas City did in response to the budget reduction requests out of London?

Browne: Not -- not to my knowledge.

Q. Were you aware that the plant manager at Texas City initiated dozens of different cost-cutting measures after receipt of this request?

Browne: I wasn't aware of that.

Q. Were you ever made aware that they reduced the maintenance spend at BP Texas City as a result of that request?

Browne: No, I wasn't aware of that.

Q. Were you aware that they reduced their staff operations in the control room at the ISOM unit by 50 percent as a result of that request?

Browne: I wasn't aware of that.

Q. Were you aware that they curtailed, cut back or completely killed a number of training programs at BP Texas City as a result of that request?

Browne: I wasn't aware of that.

Q. Were you ever made aware that this outside consulting assessment ascertained that there had been a decade of underinvestment in the infrastructure at Texas City?

Browne: No, I wasn't.

Q. Were you made aware that there were literally hundreds of millions of dollars of deferred maintenance cost that accumulated at Texas City as a result of long-term deferred budget expense on maintenance there?

Browne: No. Since I didn't see the report, I obviously wasn't aware.

How did Hayward's cuts work their way down to the Deepwater Horizon blowout? The BP pattern continues. It's a disaster fractal.

Update: BP is deferring skimmer capacity.