June 30, 2010 | Mark Paradies

The Wall Street Journal Reports: “Safety and Cost Drives Clashed As CEO Hayward Remade BP”

A very interesting article in The Wall Street Journal. See:


Some interesting quotes…

Meanwhile, company officials continued hammering home the message on costs. Mr. Shaw, the Gulf of Mexico head, made the point at a meeting for top managers in Phoenix in April 2008. His aim, according to an internal BP communication, was to instill a ‘much stronger performance culture’ in the organization, based on strictly managing costs and ‘this notion that every dollar does matter.'”

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A former BP engineer who retired last year said the Gulf of Mexico operation under Mr. Shaw became focused on meeting performance targets, which determined bonuses for top managers and low-level workers alike. The engineer says even small costs got targeted: BP no longer provided food at lunch meetings and eliminated the fruit bowls that were offered as part of a healthy-living drive a few years earlier.

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Talking about pipeline leaks in Alaska … “The state [Alaska] also said it was ‘deeply concerned with the timeliness and depth of the incident investigation’ conducted by BP. It took four months to provide a report that other oil companies typically submit in two weeks.”

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Some think the cost drive affected safety. Workers had ‘high incentive to find shortcuts and take risks,’ says Ross Macfarlane, a former BP health and safety manager on rigs in Australia who was laid off in 2008. ‘You only ever got questioned about why you couldn’t spend less—never more.’ BP vigorously denies putting savings ahead of safety.

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In a different context, BP had questioned the impact of its cost-cutting in the Gulf. After the 2008 incident on the Atlantis platform, BP’s internal report warned of lax safety oversight and tight budgets.

It concluded: ‘A key question to ask, especially with apparently minor and disconnected defects, is ‘What’s the worst thing that could happen?””

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