FRIDAY, JUNE 4, 2010
Financial effects spread to Britain
Pensioners, investors crunched by BP’s sagging stock price
by Karla Adam
london — As BP shares take a pounding and oil continues to spew into the Gulf of Mexico, Britons are starting to see the cri- sis not only as a disaster off America’s shores, but also one with reverberations here. For those about to retire, the leaking pipeline may mean leak- ing wallets. Thousands of Britons are invested in the British oil gi- ant through pension funds — analysts estimate that about 1 pound in every 7 pounds paid in dividends to British pension funds comes from BP. Investors are eager for the cri- sis to be resolved. BP is a major player on the FTSE 100, London’s main stock index, meaning that blows to its share price have sig- nificant effects on portfolios de- signed to track the index’s per- formance, such as certain pen- sion funds and insurance policies. The National Associa- tion of Pension Funds estimates that BP shares represent 1.5 per- cent of the total assets of pension funds in the United Kingdom.
Alan Smith, chief executive of Capital Asset Management, a London-based financial planning firm, said that “pretty much every pension fund in the country owns BP shares,” but up until recently, “people looked at this as an envi- ronmental disaster rather than a man-on-the-street disaster. But now they are starting to think, ‘This might affect me more than I think.’ ”
Smith estimated that if BP were to lose half its market value, a Briton about to retire could rea- sonably expect a decline of up to 3 percent in annual pension pay- ments. “Those considering retire- ment in the next six months might be disappointed people when they realize the final amount of their retirement is less than hoped,” he said. On Thursday, credit-rating
agencies Fitch Ratings and Moody’s downgraded BP’s debt and said further downgrades could follow. Since the Deepwa- ter Horizon oil well explosion, the company’s shares have fallen more than 30 percent. BP’s financial woes are also troubling for the British govern- ment, which is grappling with a ballooning deficit and could use a healthy tax return from the com- pany to help replenish the public coffers. In a statement, BP said that last year it paid corporate in-
KLMNO
The oil spill: The latest developments
BP sliced off a pipe with giant shears to prepare for an attempt to place a cap over the well.
Tar mats of oil drifted six miles from Florida Panhandle’s white beaches.
Huge tar balls and a sludge of thick oil landed on beaches in and around
Grand Isle, La.
By the numbers
$69,090,958.57
The amount on the bill the Obama administration sent to BP for U.S. government work dealing with the oil spill. Payment is due by July 1. The bill covers 75 percent of the expenses to date.
come taxes of $6.3 billion, $1.1 billion of which went to Britain. In addition, the company said it expects to pay about $4 billion in 2009 production taxes globally, $200 million of which will go to Britain.
While BP faces an uphill battle globally to restore its reputation during one of the worst environ- mental disasters in history, the climb seems less steep here, where the company is headquar- tered, is a flagship of the econo- my and has worked hard in the past decade to drive home an im- age of a green-friendly company. “BP is a great British company, for long a byword for good man- agement and successful perform- ance on an international scale,” the Express newspaper said in an editorial. “It is depressing to see its name become synonymous with environmental disaster, at least for the foreseeable future.” The Daily Mail said President
Obama’s rebukes to BP resemble “a judge who, having sentenced a penitent offender, demands
again and again that he be brought up from the cells to re- ceive another dressing down for the same crime.” David Buik, an analyst at BGC
Partners in London, said BP’s reputation in Britain had not plunged to the depths it has in the United States. “No one blinks at the gas station when filling up — BP, Shell, it doesn’t matter,” he said.
Shareholders, he said, had con-
fidence in chief executive Tony Hayward’s management. “To say the BP management is not doing all it can is not fair — maybe it’s not enough, but they seem to be doing everything they can,” Buik said.
BP employs about 80,000 peo- ple worldwide, with slightly more than 10,000 in Britain. The em- ployees in Britain are “shocked and horrified, just like everyone else” by the disaster, though few are taking seriously the swirling rumors of a takeover or breakup, Buik said.
adamk@washpost.com
S
Gulf Coast Oil Spill A15
As the oil spread, was BP battling to
contain the media?
Access restrictions ease after complaints cite land, air and sea ‘rules’
by Dan Zak
new orleans — At first, it
seemed that a British company might be trying to keep an Amer- ican journalist off an American beach. Ted Jackson, a staff pho- tographer for the Times-Pica- yune, drove two hours to Port Fourchon, La., to shoot photos of tar balls on public property but was stopped 100 yards from the surf by harbor police. After 30 minutes of phone calls to higher authorities, Jackson said, the po- lice allowed him 15 minutes of ob- structed photographing, out of view of workers who were taking samples from the beach. Last week, Jackson was also un- able to book a flight over Grand Isle from a charter plane com- pany in Belle Chasse, La., because the owner could not obtain per- mission from BP’s command cen- ter to enter restricted airspace. BP, the Federal Aviation Adminis- tration and the Coast Guard were refusing access to planes carrying media, according to Southern Seaplane’s
secretary-treasurer,
Rhonda Panepinto, who fired off a three-page letter to Sen. David Vitter (R-La.) on May 25. “We strongly feel that the rea- son for this massive [temporary flight restriction] is that BP wants to control their exposure to the press,” she wrote. “We are all at the mercy of BP, a British-owned company.” This week, things got better.
The FAA sent two special opera- tions managers to the Gulf Coast on Tuesday to oversee flight ac- cess, according to Panepinto, whose company flew Jackson around Chandeleur and Ship is- lands on Wednesday and is field- ing requests from other media outlets, with no grief from au- thorities. “It’s almost like there’s a new
sheriff in town,” Jackson said. Perhaps the gulf operation is smoothing itself out after a month and a half of oil gush and media crush. Authorities had weathered criticism for a series of minor run-ins that gave the im- pression that BP was calling the shots. Last week a Mother Jones re-
CHARLIE RIEDEL/ASSOCIATED PRESS
The oil has hit more than 100 miles of Louisiana shoreline and is approaching the Florida Panhandle.
Cable-controlled robots lower dome over oil plume
spill from A1
this entire situation. . . . Some- body didn’t think through the consequences of their actions.” Tony Hayward, BP’s chief exec- utive, acknowledged in an inter- view published Thursday in the Financial Times that BP wasn’t prepared for a blowout of this magnitude. “What is undoubted- ly true is that we did not have the tools you would want in your tool kit,” he said. The tool kits must be updated, said Rep. Edward J. Markey (D- Mass.), chairman of the House Energy and Commerce’s energy and environment subcommittee: “From junk shots to top hats, this spill shows that BP and the oil in- dustry paid more attention to drilling ultra-deep instead of cre- ating ultra-safe technologies to prevent and respond to a crisis.” Also Thursday, the Center for
Public Integrity, a nonprofit in- vestigative news organization, published an account of Coast Guard logs that indicated the Coast Guard knew within 24 hours of the explosion that the rig’s blowout preventer had failed and that the well could leak as much as 8,000 barrels a day. The center obtained the logs from Rep. Darrell Issa (R-Calif.), who said in a statement, “These docu- ments raise new questions about whether the White House was slow to respond to an incident that was quickly recognized by the Coast Guard as a potentially catastrophic threat to the envi- ronment.”
Six weeks to the day after Deep-
water Horizon sank, and five days after BP and the government gave up hope for killing the well with blasts of drilling mud, the top hat offered the best chance so far of capturing the leaking oil before it
on
washingtonpost.com
Bogged down in oil and nowhere to go
More photos Local
wildlife in the Gulf of
Mexico are struggling to survive as the oil reaches new habitats and shorelines.
BP VIA ASSOCIATED PRESS
In this image made from video released by BP, a saw trims part of the blowout preventer. It failed and was replaced by giant shears.
can pollute the gulf further. The deep-sea plumbing job made for compelling viewing for anyone with an engineering bent, especially now that BP, once stin- gy with video, has gone to wall-to- wall, multiple-camera coverage, putting the live feed from 12 cam- eras on its Web site. The video has shown an un-
derwater ballet featuring a ship- yard’s worth of hardware, includ- ing robotic vehicles, giant shears, a diamond-edge saw, pipes, hoses, tethers, heavy weights and the in- famous blowout preventer that did not prevent the blowout. The submarines and their metallic, pincer-grip arms are joysticked via mile-long cables by techni- cians at the surface, who take or- ders from engineers in BP’s war room in Houston. The deep-sea procedure is deli-
cate and sometimes herky-jerky. The first attempt to cut the pipe, with the diamond-wire saw, failed when the saw became stuck for 12 hours, pinched by the pipe.
“Anybody who’s ever used a saw knows that once in a while it will bind up,” Adm. Thad Allen, the national incident commander, noted Wednesday. When the saw came free, it still
couldn’t cut through the riser be- cause of the loose, rattling drill pipe that is threaded inside and wobbling around, preventing a firm cut, Allen said. So BP engi- neers resorted to giant shears Thursday morning. The cut was highly irregular, but engineers went back with the circular saw, slicing off an at- tached box and smoothing the edges in preparation for the top hat. Allen said BP has at least five different caps with different con- figurations standing by for the containment maneuver. The first attempt at contain- ment several weeks ago went awry because the large dome low- ered over the main leak in the pipe had no mechanism for lim- iting the amount of water mixing with the oil and gas. The very cold
water and gas combined to form slushy methane hydrates that clogged the dome and made it buoyant, so that it wanted to float away from the leak. That’s why so much attention has been paid to the cutting of the riser pipe and the creation of a good fit for the new containment cap. The better the seal, the less likelihood that methane hydrates will foil the containment. The government has estimated
that the flow rate from the well could increase 20 percent with the bent pipe no longer partially constricting the oil and gas. Allen waved off suggestions that the federal government has lost faith in BP’s trustworthiness. He said BP had given him whatever he had asked for. “When I ask for action, it is tak-
en,” Allen said. “The fact of the matter is that we have to do this together.” The administration is keeping close tabs on expenses. The Coast Guard sent BP a bill Thursday for $69 million — $69,090,958.57, to be exact — giving it until July 1 to reimburse the government for military, National Guard and fed- eral agency efforts to cope with the oil spill.
achenbachj@washpost.com
Staff writers David A. Fahrenthold, Garance Franke-Ruta, Steven Mufson and Dan Zak contributed to this report.
porter was told she couldn’t see Elmer’s Island without being ac- companied by a BP representa- tive, because it’s “BP’s oil.” Two weeks ago Coast Guard officials cited “BP’s rules” when demand- ing that a CBS News crew leave a beach area. (Representatives from CNN, ABC and local CBS affiliate WWL-TV in New Orleans said last week that their journalists had not encountered significant ob- stacles while covering the oil story.) “Neither BP nor the U.S. Coast Guard, who are responding to the spill, have any rules in place that would prohibit media access to impacted areas and we were dis- appointed to hear of this inci-
dent,” said Rob Wyman, a lieuten- ant commander for the Coast Guard, in a statement responding to the CBS episode. “In fact, media has been actively embedded and allowed to cover response efforts since this response began, with more than 400 embeds aboard boats and aircraft to date.” On Saturday, a University of
North Carolina energy blog titled Powering a Nation posted images of a BP contract that barred own- ers of vessels it chartered from making “public statements.” A BP spokesman said the company has standard contractual language designed to protect proprietary information, and that it has al- lowed media to cover its Vessels of Opportunity program, which em- ploys local boat owners in clean- up efforts. The FAA responded to initial criticism over air traffic restric- tion by citing security concerns and asserting that BP employees and contractors were not involved in those decisions. Hundreds of media outlets are demanding access to a highly mu- table, complex situation, and lo- cal, state and federal officials say they are working together — un- der the majestic heading of Deep- water Horizon Unified Command — to streamline the responses to both reporters and the public. “With regards to media, we fol- low an incident command system, a tried-and-true way of respond- ing to crises,” said a spokesman for BP from the Unified Com- mand’s headquarters in Robert, La. “You have public information officers and you have a joint infor- mation center that includes the responsible party, BP, as well as government agencies who have involvement and oversight for this spill, the Coast Guard being the federal on-scene coordinator. We have state people, NOAA, rep- resentatives from Transocean [the company that owned the rig that created the spill]. We’ve had MMS. What we do is use informa- tion that comes in through our operations and create, if you will, the message to share.” That message, right now, is that the authorities want to provide access to the story while main- taining the proper safety param- eters for both cleanup workers and the environment itself. But there might be more obstacles down the road if the situation in- tensifies, according to Chip Bab- cock, a trial lawyer specializing in media and First Amendment cases at the Houston legal firm Jackson Walker, which brought suit against FEMA when it blocked journalists from covering the removal of dead bodies in the weeks after Hurricane Katrina. “There’s going to be, I think, a
natural hesitancy to let journal- ists show images of the horrific scenes that are going to happen purely in the next few weeks,” Babcock said. “You’ll see these beaches clogged with oil, and ani- mals suffering, and I think — hu- man nature being what it is — there’s going to be some people who don’t want those images shown.”
zakd@washpost.com
Interior denies freeze on shallow drilling in gulf
by Steven Mufson
The Interior Department de-
nied Thursday that it has extend- ed a drilling freeze to shallow wa- ters of the Gulf of Mexico, contra- dicting an e-mail written earlier in the day by the Minerals Man- agement Service’s supervisor of field operations for the gulf. The confusion started when MMS rescinded some shallow- water permits issued earlier in the week. Michael J. Saucier, re- gional supervisor of field opera- tions for the MMS Gulf of Mexico region, sent identical e-mails to at least two companies whose dril- ling permits were rescinded, say- ing that “until further notice we have been informed not to ap- prove or allow any drilling not [sic] matter the water depth.” Later, as hedge fund and in- vestment bank trading desks scrambled to decipher the admin- istration’s intentions, an Interior Department spokesman said: “Shallow water drilling may con- tinue as long as oil and gas opera- tions satisfy the environmental and safety requirements Secre- tary [Ken] Salazar outlined in his report to the President and have exploration plans that meet those requirements. There is no mora- torium on shallow water drilling.” Drilling-rig operators said that
new regulations — which haven’t been issued yet but are expected
to be out before President Obama arrives in the area Friday — might cause substantial delays in dril- ling plans even without a morato- rium. One said he was told that some rig operators who have val- id permits and are in the middle of drilling might be asked to stop and refile permit applications. “What we don’t know is what additional safety information will be required and how long it will take us and our lessees to compile that information, and whether we will have a de facto extension of the moratorium to shallow wa- ters,” said Jim Noe, general coun- sel of Hercules, the largest opera- tor of shallow-water jackup rigs in the gulf. “And that’s the real concern.” Hercules received an e-mail re- scinding a permit issued this week for a well project scheduled to commence in a week or two. Obama announced last week
that he would suspend drilling in deep water in the gulf for six months, effectively delaying plans for at least 30 rigs. Law- makers from Gulf Coast states had urged him to allow continued drilling in shallow waters to pro- tect jobs in the region, and Oba- ma did so.
Shallow-water rig operators
have argued that their risks are different from the deep-water drilling that led to the giant oil spill.
mufsons@washpost.com
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