BP SINKING?

BP's value has hit a 14-year low: in the aftermath of the major environmental disaster in the Gulf of Mexico, BP has lost almost half of its market value, $82 bn and, by 11 June, the company was valued at $91.4 bn. Investors fear further increases in risks and expenses. 

The dramatic decline in share value followed pressure from Washington, as US President Barack Obama blamed the company for failing to deal with the catastrophe in a reasonable time. The White House has threatened the company with further penalties for the disaster, while federal authorities plan to send BP a bill for $69 million. A White House spokesman said that the company must pay the bill before 1 July. The money will reimburse the government for emergency response expenditure. All future expenses of the US authorities must be covered by the company.

When this edition went to print, there was still no BP response to the new White House demands. Experts think the British company is likely to refer to the 1990 Oil Pollution Act, whereby the guilty party is responsible for eliminating only the direct consequences and environmental damage.

It is not known how the White House will respond to this argument. What is beyond doubt is that BP will suffer huge losses in eliminating the consequences. According to Goldman Sachs, the company will spend a total of $33 bn over 10 years. 

Several experts believe that to find money to deal with the consequences of the spill, the company will have to sell some of its assets. Western media have even written about a possible "hostile takeover" of BP by the competition. Companies with the potential to take over BP include Royal Dutch Shell and Exxon Mobil. Most analysts, however, rule out such a possibility, adding that no-one would want to assume the risks BP has faced in the wake of the Gulf of Mexico spill. 

This, the biggest disaster in the Gulf of Mexico, occurred on 20 April following a blast at BP's Deepwater Horizon platform which killed 11 people. On 22 April the platform sank, damaging the well. BP's efforts to stop the spill have thus far proved to be in vain. 

The first attempt to deal with the problem failed almost immediately, as BP failed to cover the platform with a huge dome. The second attempt, which involved injecting drilling fluid into the well through 1.5-km pipes, also proved unsuccessful. The fluid did interrupt the flow of oil from the well for some time, but a short while later the oil started leaking again.

Finally, early this month BP managed, at the second attempt, to cut off the damaged section of pipe and install a cap to pump out most of the leaking oil. However, the pipe section proved to be uneven and it turned out that the leak could not be contained completely. Nevertheless, BP can pump out 10,000 barrels of oil a day, i.e. more than half of the product flowing into the open sea. In parallel, the company is drilling two relief holes, but they will not be completed before August.

Following the oil spill, the US government has declared a state of emergency in the fishing sectors of three southern states - Louisiana, Mississippi and Alabama. These three states have suffered the greatest economic damage. 27,000 people work in the fishing sector in Louisiana alone. The spill has left many of them jobless. The state contributes about 40 per cent of the US's total seafood production. 

US experts think the spill off the coast of Louisiana has become the worst environmental catastrophe in US history. BP has expressed its readiness to finance the construction of different sand barriers in the Gulf of Mexico to contain the spread of oil spills to the coasts of Florida. These will connect several islands off the coast of Louisiana. The aim is to protect the vulnerable ecosystems of coastal land from the oil.

However, environmentalists do not think the company can do this before the oil slick reaches Florida. The barriers may be of help only in the far future because it will take about a year to construct the entire chain of islands. 

Caspian still quiet

Meanwhile, the catastrophe in the Gulf of Mexico has raised a multitude of concerns for countries producing oil offshore. Namely, how right are the US congressmen who claim that, according to BP documents, the company had received repeated warnings about a possible explosion, but took no measures in time? How likely is it that such a disaster could occur in the Azerbaijani section of the Caspian?

The reaction of the State Oil Company of Azerbaijan (SOCAR) to the Gulf of Mexico incident was very prompt. It stepped up safety measures in the Caspian. SOCAR President Rovnaq Abdullayev signed an order to improve safety procedures at offshore platforms. "By this order we are insuring ourselves further, even though our environmental and technical safety standards are already quite high," he said.

According to Abdullayev, the blast at Deepwater Horizon will not affect BP's activities in Azerbaijan.

The Fineco news agency reports that Azerbaijan has repeatedly faced problems of high pressure during oil and gas operations offshore (including those involving BP), but preventers have always worked well and platforms have never been destroyed. BP's preventer in the Gulf of Mexico did not work for some reason.

The director of the petroleum research centre, Ilham Saban, has said that the relatively low depths of the Caspian Sea and the wells in it make them less dangerous. He says that the fields being developed by SOCAR are less than 100 m deep; licence areas are 300-400 m deep, while the wells go down 3,000-4,000 metres. This is much shallower than BP's well in the Gulf of Mexico, where work is done in 1,500 metres of water, while the well is 10,000 m deep.

Another important aspect is that all platforms in the Azerbaijani section of the Caspian are fixed. New wells rest on sea-bed templates, which also strengthen their resistance to different fluctuations. The ballasts which supported BP's platform in the Gulf of Mexico sank after the blast, and there was nothing to support the platform. The expert also highlighted the importance of the fact that there are several environmental services in the Caspian. Before the Contract of the Century was signed, there was only one emergency rescue service in the Caspian, while a new geological section and joint venture, ECOL, have been established since then. BP's environmental partner is Briggs Marine, which deals with emergency response activities offshore, at pipelines, terminals etc.  

Saban added that Azerbaijan has established tight environmental and safety standards. He said that specialists have repeatedly encountered high pressures, at both reservoir and well-mouth level, in Azerbaijani fields. Operations were suspended at Central Azeri, the biggest oil producing platform in the Caspian, for three months due to high pressure.  

The legislative supervision of projects and control over environmental safety during oil and gas production by BP and partners is exercised by the Ministry of Ecology and Natural Resources of Azerbaijan. A source from the ministry said that all parameters of the production process were under control. The key document pertaining to the prevention and elimination of any accidents is called the Environmental Impact Assessment. 

The ministry has given a positive assessment of the work BP does to prevent such accidents in Azerbaijan. The source added that the ministry has been examining oil projects for a long time, focusing on possible emergency situations, ways of eliminating their consequences and circumstances beyond control. BP and its partners in Azerbaijan meet all their environmental safety commitments. The ministry also monitors the environmental impact of 31 offshore oil and gas facilities. The quality of the seawater, oil production equipment etc. are subject to monitoring. There have been no oil spills in the Azerbaijani section of the Caspian Sea yet. Neither are there problems with safety.         

BP-Azerbaijan says nothingto worry about

A source from BP-Azerbaijan has said that before starting any project, the company makes thorough assessments of possible environmental and social impacts. According to the company's external affairs manager, Tamam Bayatli, the environmental and social impact assessment is difficult and expensive work. Specialists and experts of different backgrounds work on the preparation of this document. Once the document is ready, measures are identified to prevent any environmental impact. These measures are based on available international and Azerbaijani oil and gas production experience and the most effective technologies are chosen.  

Bayatli added that there should be no doubt that BP itself is interested in observing health, safety and environmental requirements. The BP source said further that an investigation into the Gulf of Mexico incident would shed light on what caused the disaster. When investigation results have been obtained and reasons established, they will have to be analyzed. And if recommendations are made, they will certainly be accepted by everyone in the oil industry to prevent this from happening again. BP enforces very strict health, safety and environmental standards in the Caspian basin, the BP-Azerbaijan source concluded.