From the Anchorage Daily News (Wesley Loy):
BP lacked a good process for assessing corrosion risk in Prudhoe Bay pipelines, and corrosion fighters were forced to make “tradeoffs” to meet budget targets, a BP-hired consultant found.
The report from Booz Allen Hamilton, a McLean, Va., consulting firm, emerged May 16 as BP’s top U.S. executive, Bob Malone, took a grilling from a congressional panel.
Congressmen said the report, coupled with e-mails BP recently turned over, suggest the London-based oil giant’s emphasis on cost-cutting led to corroded pipelines and spills last year in Prudhoe, the nation’s largest oil field, and a 2005 explosion that killed 15 people at a BP refinery in Texas.
BP hired Booz Allen last year to look into two Prudhoe pipeline leaks — one discovered in March 2006 involving an estimated 201,000-gallon spill on the North Slope tundra, and another on Aug. 6 that led to a partial shutdown of the field, driving up world oil prices.
Booz Allen said it wasn’t looking for evidence that could be used in court to show negligence or unlawful conduct. But the report’s authors said they “saw no information to suggest that any BP employee or contractor acted in anything other than good faith.”
Aside from Congress, federal pipeline regulators, Alaska pollution regulators and federal criminal investigators are scrutinizing the Prudhoe problems.
Among the findings in the 132-page Booz Allen report:
• BP lacked an adequate process for assessing corrosion risk in pipelines and for making adjustments — for example, when the composition of oil changes, possibly increasing corrosion.
• BP’s corrosion control team was isolated, out of touch with senior BP management, and felt a sense of “overconfidence” in preventing leaks because it had been regarded as a top-notch unit within BP.
• The corrosion unit made “tradeoffs” in part to meet budget targets. For example, there was a “reasonable and well-documented reluctance” to use pigs — probes that slide through pipes testing for corrosion or other defects. However, larger budgets alone wouldn’t have prevented the pipeline leaks because “fundamental changes” were needed in maintaining pipelines.
• BP manages 1,273 miles of pipelines across Prudhoe Bay, but the 16 miles of key “oil transit lines” — major trunk lines that funnel crude oil into the trans-Alaska pipeline and which were the site of last year’s leaks — were an afterthought. BP’s corrosion control unit was fractured into “town” and “field” units, and no one took ownership of the transit lines. These pipes carried pure oil and no corrosive water, and thus BP viewed them as invulnerable to holes caused by corrosion. They hadn’t failed over Prudhoe’s 29-year history.
• Since last year’s pipeline spills, BP has antagonized government regulators and “relationships have become strained.”
The report outlines BP’s “deeply ingrained” cost-control efforts during years of low oil prices in the 1990s, the steep decline of Prudhoe oil production, and BP’s takeover of Amoco and ARCO, which led to reorganizations that pushed the corrosion control unit down deeper in the BP hierarchy.
Suggest tapping maintenance expertise outside state
Booz Allen makes a raft of recommendations, many of them urging BP to beef up its procedures for ranking and managing pipeline corrosion risks. It also urges BP’s Alaska subsidiary to be less insular, to “immediately reach out from Alaska” to tap pipeline maintenance expertise from other industries such as chemicals, nuclear power, the Navy and NASA.
The consultant says BP has made some progress toward improving pipeline maintenance, including a big hiring surge for its corrosion unit, moving corrosion control higher up in the organization and replacing miles of pipelines. But much work remains, the report says, noting “risk management is still a work in progress.”
Leak detectors did not give proper warning
The report also includes some bits of news.
BP is working with the state Department of Environmental Conservation on a new and better leak-detection system for oil transit lines. The report notes that leak detectors last year “did not provide ample warning of the leak.”
Booz Allen said it conducted its investigation over 10 weeks starting last November.
The firm lists the names of 75 current and former BP employees it interviewed. One name not on the list, however, is Richard Woollam, who was BP’s corrosion manager through November 2004.
Woollam, who was transferred to Houston and is said to be on administrative leave, last September appeared before a congressional committee but refused to answer questions, invoking his Fifth Amendment right against self-incrimination.
In Alaska, BP had a deeply ingrained cost management ethic as a result of long periods of low oil prices, constrained budgets, and multiple cost/headcount reduction initiatives. CIC (BP’s corrosion team) made important project and activity tradeoff decisions to meet its budget targets. Larger budgets alone would not have prevented these incidents without fundamental changes in corrosion and integrity management.