Safety and the Licence to Operate

On the evening of 20 April 2010 the crew of the Deepwater Horizon, a semi-submersible drilling rig owned by Transocean, was finishing an exploration well called Macondo, in Mississippi Canyon Block 252 off the Louisiana coast, in about 5,000 feet of water. BP was the operator, with 65%; Anadarko held 25% and Mitsui's MOEX 10% (reported). The well had found oil and was being temporarily sealed so that it could be completed for production later. It was about $58 million over budget and about six weeks behind schedule, and the rig was late for its next job (reported). The well design and cement choices had been faster and cheaper than the alternatives but gave fewer barriers against an uncontrolled flow (National Commission findings, reported).

That evening the cement at the bottom of the well failed to seal. The crew ran a negative-pressure test, misread its result as a success and began replacing the heavy drilling mud in the well with seawater. Oil and gas entered the riser and reached the rig floor; the blowout preventer on the seabed failed to close the well; the gas ignited. Eleven workers died. The rig sank on 22 April, and oil flowed for 87 days until a sealing cap stopped it on 15 July; a relief well sealed the well on 19 September 2010. It was the largest marine oil spill in US history: about 3.19 million barrels by the court's finding for penalty purposes, about 4.9 million by the government's estimate (reported).

The cost reshaped BP. Its market value fell by about half between April and June 2010 (reported). On 16 June it agreed with the White House to fund a $20 billion escrow account for claims, suspended its dividend and began selling assets. Its chief executive, Tony Hayward, was replaced by Bob Dudley on 1 October. The federal government imposed a moratorium on deepwater drilling from May to October 2010 that stopped the whole industry, and split the Minerals Management Service, which had both leased and policed offshore drilling, into separate agencies for leasing, safety and revenue. In November 2012 BP pleaded guilty to fourteen criminal counts, including eleven of seaman's manslaughter, with about $4 billion in penalties. On 4 September 2014 a federal judge, Carl Barbier, found BP grossly negligent and 67% responsible, with Transocean 30% and Halliburton, which had cemented the well, 3%. In July 2015 BP agreed a federal and state settlement of about $20.8 billion. Its cumulative pre-tax charges for the disaster reached about $65 billion by 2018 (reported), more than any industrial accident had cost a company before.