What went wrong at Prudhoe Bay
In his first interview since early in BP's Prudhoe Bay pipeline crisis, new BP America president and chairman Robert Malone speaks with Fortune's Abrahm Lustgarten.
(Fortune Magazine) -- In his first interview since early in BP's Prudhoe Bay pipeline crisis, new BP America president and chairman Robert Malone took time out with Fortune's Abrahm Lustgarten to talk about what went wrong in Alaska and whether BP's string of problems mean the world's second largest oil company has widespread operational difficulties in North America.
You're two months into your job as head of BP America and it seems to be more hornet's nest than welcome wagon. How's it going?
I had a lot of candid conversations with John Browne about what I was walking into. Alaska is the part that I didn't anticipate. That first week was probably the most difficult in my career. Now we are out of crisis mode and into managing this for safety and integrity.
You shocked the markets with an announcement to shut-in a full 8% of US production then moderated a few days later by only shutting one line. Was there pressure to keep Prudhoe Bay open despite concerns?
I did not feel any pressure to make that decision, internally or externally. We had positive data by that Monday morning that the west pipeline may be different but we were not satisfied until Friday. By then we felt comfortable that there was sufficient data to make a good risk-based decision.
You didn't run pigs - a device that inspects the inside of the pipeline - because conventional wisdom held that your ultrasonic method was better. Is what happened challenging your maintenance assumptions company-wide?
Absolutely. Normally smart pigging identifies inclusions or corrosion spots and then you come back with UT technology later. UT is the highest level of assurance that you can get - much more accurate than pigging. Now we know that there is a gap, and pigging will become part of our procedures.
I've visited a number of facilities and I not only test the management, I also get out on the shop floor. I have not had an employee tell me that they were concerned to raise a safety issue, or an employee tell me they would not hesitate to shut down an operation they thought was unsafe.
On Prudhoe Bay; there has been an 80% increase on our spending on the corrosion management year over year since 2000. Our corrosion experts said they felt that they were spending the money that they needed. We do have got to go back and do the in-depth review, which we are going to do, into the failure mechanism to really understand what happened there.
BP has weathered a litany of problems recently besides this latest - from the Texas fire to a gas commodities trading scandal, and an oil spill. Isn't it getting harder to view them each as isolated events?
Texas City was a tragedy; a lot of lessons were learned. And when I listen to the trader tapes there is no doubt in my mind, what happened may not have broken the law, but it broke our values.
In my visiting facilities across the country and talking to employees and management though I cannot draw a systemic problem in BP America. What I've seen is refineries and facilities and plants that are operating to the highest level of safety and integrity standards.
But I also don't believe in bad luck. There is a foundation that we need to understand and address at the facilities, and then translate the lessons across all operations.
What does BP's green branding mean in light of its problems in North America?
I understand if people want to say "how can you have something like this happen and you are supposedly a green company?" But I would say if you shut down for environmental reasons you are a pretty green company.
We are going to need to communicate our value system. If you look at the facts, we're investing heavily in alternative energy and we are putting our money where our mouth is. (BP announced acquisition of a $98 million wind energy company last week)
What comes next for you, and for BP?
The majority of my time right now is spent working to get our operations back in business. Then I will continue to go out and communicate the importance of operational safety to our sites.
That's an absolute priority. The U.S. holds 40% of BP's employees, its assets, its shareholders. This [is] a huge piece of our business. And part of my job is to grow it. As we come though this we'll be a better and stronger company for it. But its not what I say, its what we do - how we perform, how we operate.