How BP copes with the current crisis will affect the future of offshore oil exploration, explains Bob Moser
As BP continues to scramble for a solution to the Deepwater Horizon oil spill, analysts say the way the company conducts itself in the coming weeks will steer the future of US offshore drilling.
The long-term consequences to BP’s brand value in the US may come down to how much compassion the company offers those affected by the spill, while still guarding its brand against lawsuits.
Larry Wall from the Louisiana Mid-Continent Oil and Gas Association does not expect a consumer revolt against BP, but mostly because the company’s brand is not especially high-profile.
“After the Exxon spill in 1989 there was an Exxon station every four miles in the US. BP doesn’t have that many branded outlets in the US,” he says. “This time the issue is going to be if the investors stay with BP during this downturn, or if they bail.”
Wall argues that in a disaster like this “there’s never going to be enough done quickly enough to please everyone. You’re playing catch-up the whole time.”
He thinks it is impossible at this point to judge how much this incident will scar BP’s reputation in the US. “It’s a unique situation, the first deepwater well to have something like this happen,” Wall says.
Reputation on the line
John Maginnis, long-time Louisiana news commentator and editor of Lapolitics.com, says BP seems to have been very responsive so far. He says: “They know their ass is on the line.”
What is now clear, and not necessarily best for BP, is that it won’t be able to pass blame or costs for the clean-up on to other companies, Maginnis says.
Swiss-based Transocean owned the rig and the blowout-prevention safety device. The blowout preventer was made by Houston-based Cameron. Halliburton also did a cementing operation on the rig 20 hours before the incident.
“All the finger-pointing was ridiculous, and Obama put an end to it,” Maginnis says. As the rig’s overall operator, “it all rests on the back of BP”.
Maginnis argues that while BP may go to court to get other companies to reimburse it for costs, “the federal and state governments will be looking directly at BP”.
The fallout from this spill is more likely to taint the reputation of the oil business as a whole, rather than just BP, because the industry’s main goal is to expand offshore drilling. That has been shut down for now by the US federal government.
And the whole industry should be concerned about next year if there is movement on new legislation to apply an oil processing tax for offshore oil.
“People just want to see drilling done safely, and there’s no correlation between taxation and safety,” Maginnis says. “But when the smoke and oil clears, the oil processing tax debate may be revisited.”