`
`
`
`
`
`
`
`10-110
`Rev. April 3, 2012
`
`BP and the Deepwater Horizon Disaster of 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`When he woke up on Tuesday, April 20, 2010, Mike Williams already knew the standard procedure
`for jumping from a 33,000 ton oil rig: “Reach your hand around your life jacket, grab your ear, take
`one step off, look straight ahead, and fall.”1 This would prove to be important knowledge later that
`night when an emergency announcement was issued over the rig’s PA system.
`
`Williams was the chief electronics technician for Transocean, a U.S.-owned, Switzerland-based oil
`industry support company that specialized in deep water drilling equipment. The company’s $560
`million Deepwater Horizon rig was in the Gulf of Mexico working on the Macondo well. British
`Petroleum (BP) held the rights to explore the well and had leased the rig, along with its crew, from
`Transocean. Of the 126 people aboard the Deepwater Horizon, 79 were from Transocean, seven were
`from BP, and the rest were from other firms including Anadarko, Halliburton, and M-1 Swaco, a
`subsidiary of Schlumberger.
`
`
`Managing electronics on the Deepwater Horizon had inured Williams to emergency alarms. Gas
`levels had been running high enough to prohibit any “hot” work such as welding or wiring that could
`cause sparks. Normally, the alarm system would have gone off with gas levels as high as they were.
`However, the alarms had been disabled in order to prevent false alarms from waking people in the
`middle of the night. But the emergency announcement that came over the PA system on the night of
`April 20 was clearly no false alarm.
`
`
`
`
`1 Testimony from Michael Williams, The Joint United States Coast Guard/The Bureau of Ocean Energy Management, “FUSCG/BOEM Marine Board of
`Investigation into the marine casualty, explosion, fire, pollution, and sinking of mobile offshore drilling unit deepwater horizon, with loss of life in the Gulf of
`Mexico 21-22 April 2010,” Transcript, July 23, 2010, pp. 24-25.
`
`This case was prepared by Christina Ingersoll (MBA Class of 2010) and Cate Reavis, Manager, MSTIR, under the supervision
`of Professor Richard M. Locke. Professor Locke is Deputy Dean of the MIT Sloan School of Management, Head of the MIT
`Department of Political Science, and the Class of 1922 Professor of Political Science and Management. This case was
`prepared as part of the MIT Sloan Ethics, Values and Voice Module.
`Copyright © 2011, Richard M. Locke. This work is licensed under the Creative Commons Attribution-Noncommercial-No
`Derivative Works 3.0 Unported License. To view a copy of this license visit http://creativecommons.org/licenses/by-nc-nd/3.0/
`or send a letter to Creative Commons, 171 Second Street, Suite 300, San Francisco, California, 94105, USA.
`
`1 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`Moments after the announcement, Williams was jolted by a nearby thud and a hissing sound,
`followed by the revving of one of the rig’s engines. Before he knew it, there were two explosions
`forcing him and other crew members to abandon ship by jumping into the partially flaming ocean.2 Of
`the 126 workers on board the Deepwater Horizon, 17 were injured, including Williams, and 11 were
`killed. The rig burned for 36 hours, combusting the 700,000 gallons of oil that were on board, leaving
`a trail of smoke over 30 miles long. The Deepwater Horizon sank on April 22, taking with it the top
`pipe of the well and parts of the system that were supposed to prevent blowouts from occuring.3
`
`As of 2010, the Deepwater Horizon disaster was the largest marine oil spill ever to occur in U.S.
`waters. By the time the well was capped on July 15, 2010, nearly five million barrels of oil
`(205.8 million gallons) had spilled into the Gulf of Mexico. Federal science and engineering teams
`revised their estimates on the rate of oil flow several times, and in August they concluded that
`between April 20 and July 15, 53,000-62,000 barrels per day spilled into the Gulf,4 an amount that
`was equivalent to a spill the size of the 1989 Exxon Valdez every four to five days.5 Before the
`Deepwater Horizon disaster, the Exxon Valdez held the record for the largest spill in U.S. waters.
`
`It was surprising to many analysts how such a disaster could happen, particularly involving a
`company like BP, which publicly prided itself on its commitment to safety. It did seem clear that, in
`an effort to close up the Macondo well, several key decisions were made, each involving multiple
`stakeholders and trade-offs of time, money, safety, and risk mitigation. The public debate began
`immediately on whether the result of these decisions indicated operational or management problems
`on the rig, and whether these problems were endemic to the oil industry, or resided within BP
`itself. To help answer these questions, several task forces were formed to investigate the root causes
`of the disaster and who among the various players involved with the Macondo well bore
`responsibility for the disaster and for its resolution.
`
`British Petroleum
`The company that would become BP was founded in 1909 as the Anglo-Persian Oil Company
`(APOC) shortly after Englishman William Knox D’Arcy struck oil in Iran after an eight-year search.
`In its early years, profitability proved elusive for APOC and, in 1914, Winston Churchill, who was
`head of the British Navy and believed Britain needed a dedicated oil supply, convinced the British
`government to buy a 51% stake in the nearly bankrupt company.
`
`
`
`
`2 The Joint United States Coast Guard/The Bureau of Ocean Energy Management, “FUSCG/BOEM Marine Board of Investigation into the marine casualty,
`explosion, fire, pollution, and sinking of mobile offshore drilling unit deepwater horizon, with loss of life in the Gulf of Mexico 21-22 April 2010,” Transcript,
`July 23, 2010, pp. 10-14.
`3 U.S. House of Representatives Committee on Energy and Commerce, “Chronology of Deepwater Horizon Events,” June 15, 2010.
`4 Campbell Robertson and Clifford Kraus, “Gulf Spill is Largest of Its Kind, Scientists Say,” The New York Times, August 3, 2010.
`5 Calculation based on a spill size of 10.8 million gallons for the Exxon Valdez. Justin Gillis and Henry Fountain, “New Estimates Double Rate of Oil Flowing
`Into Gulf,” The New York Times, June 10, 2010.
`
`Rev. April 3, 2012
`
`2
`
`2 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`The British government’s majority ownership of BP lasted until the late 1970s when the government,
`under Prime Margaret Thatcher, a proponent of privatization, began selling off its shares in an attempt
`to increase productivity in the company. When the government sold its final 31% share in 1987, BP’s
`performance was floundering. The company’s performance continued to decline as a newly private
`company; in 1992, BP posted a loss of $811 million. Nearing bankruptcy, the company was forced to
`take dramatic cost cutting measures.
`
`Things started to improve measurably in the mid-1990s. With a streamlined workforce and portfolio
`of activities, BP’s new CEO began implementing an aggressive growth strategy, highlighted by
`mergers with rivals Amoco in 1998, and ARCO (the former Atlantic Richfield) in 2000.
`
`Along with focusing on growth, BP began repositioning itself. In 2001, the company launched the
`new tagline “Beyond Petroleum” and officially changed its name to “BP.” The associated green
`branding campaign indicated that BP wanted to be known as an environmentally-friendly oil
`company. Over the next decade, the company launched an Alternative Energy division and was, for a
`time, the world’s largest manufacturer of solar cells and Britain’s largest producer of wind energy. BP
`invested $4 billion in alternative energy between 2005 and 2009.6 BP’s total company investment
`over the same time period was $982 billion.7
`
`In May 2007, Tony Hayward, who had been chief executive of Exploration and Production (BPX),
`replaced John Browne as CEO. Hayward marked his appointment with a speech pledging to “focus
`like a laser on safety issues, put the brakes on growth and slash production targets.”8 Hayward was
`able to improve corporate performance, in part, by dramatically shrinking the Alternative Energy
`division and further reducing headcount at both managerial and lower staff levels.9 Between 2006 and
`2009, BP’s workforce fell from 97,000 to 80,300.10
`
`In addition to cutting four levels of management, Hayward also spoke publicly about his desire to
`transform BP’s culture to one that was less risk averse. He believed that too many people were
`making too many decisions leading to extreme cautiousness. “Assurance is killing us,” he told U.S.
`staff in September of 2007.11
`
`Despite Hayward’s concern about the company’s risk averse culture, in a relatively short period of
`time, BP had transitioned from a small, state-sponsored company to one of the six largest non-state-
`owned oil companies in the world and, in the month before the Deepwater Horizon disaster, the
`largest company listed on the London Stock Exchange. The transition required numerous mergers
`
`6 “BP Sustainability Reporting 2009: Alternative Energy,” BP Publication, April 15, 2010.
`7 BP annual financial statements: 2007 and 2009.
`8 Tony Hayward, “BP 2008 Strategy Presentation,” BP Publication, February 27, 2008.
`9 Ibid.
`10 BP.com archive information on employment, for 2006 data; “BP at a Glance” from BP.com, accessed October 10, 2010 for 2009 data.
`11 Graeme Wearden, “BP to Take Axe to Management,” The Guardian, September 25, 2007.
`
`Rev. April 3, 2012
`
`3
`
`3 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`and acquisitions, and strict cost cutting measures. Along the way, BP’s organizational structure was
`also dramatically transformed.
`
`Organizational Strategy
`BP in the late 1980s comprised several layers of management in a matrix structure that made it
`difficult for anyone to make decisions quickly. In some cases, simple proposal changes required 15
`signatures. At the same time, the company was overleveraged and its overall performance was
`suffering.12 Robert Horton, who was appointed CEO in 1989, started a radical turnaround program in
`an effort to cut $750 million from BP’s annual expenses. He removed several layers of management
`and slashed the headcount at headquarters by 80. Horton also intended to increase the speed of
`managerial decision-making and, thereby, the pace of business in general. Horton transformed
`hierarchically structured departments into smaller, more flexible teams charged with maintaining
`open lines of communication.13
`
`Horton transferred decision-making authority away from the corporate center to the upstream and
`downstream business divisions. While deep cuts were made to capital budgets and the workforce,
`employees at all levels were encouraged to take responsibility and exercise decision-making
`initiative. In 1992 David Simon was appointed CEO replacing Robert Horton. Simon continued
`Horton’s policy of cost cutting, especially in staffing.
`
`The biggest changes during this period occurred in BPX, which was led by John Browne. Building
`upon his predecessors’ efforts, Browne, who envisioned creating a spirit of entrepreneurship among
`his staff, extended decision-making responsibilities to employees at more levels in the organization.
`Under the new strategy, decision-making authority and responsibility for meeting performance targets
`was no longer held by BP’s regional operating companies, but by onsite asset managers.14 Asset
`managers contracted with BP to meet certain performance targets and extended this practice among
`all employees working on a given site. Employee compensation was tied to asset performance and the
`overall performance of the site. The model, which was known as an “asset federation,” was later
`applied across the company after Browne took over as CEO in 1995.
`
`One tradeoff with the asset federation model was that because each site manager managed their
`“asset” autonomously and was compensated for its performance, there was little incentive to share
`best practices on risk management among the various BP exploration sites.15 There were also
`downsides to a system in which a centralized body had little oversight over the setting of performance
`targets, particularly in an industry where risk management and safety were essential to the long-term
`success of an oil company. And BP had had its shares of safety breaches.
`
`
`12 John Roberts, “Organizing for Performance: How BP Did It,” Stanford Business, February 2005.
`13 “BP After Horton,” The Economist, July 4, 1992.
`14 Each physical well site was called an asset and the site managers were “asset managers.”
`15 David Apgar, “Time to Break BP Up,” The Globalist, June 22, 2010.
`
`Rev. April 3, 2012
`
`4
`
`4 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`Safety Issues at BP
`In the mid-2000s, disaster struck BP twice within a 12-month period. The first happened on March
`23, 2005 when an explosion at BP’s Texas City Refinery killed 15 people and injured another 180,
`and resulted in financial losses exceeding $1.5 billion. BP commissioned James Baker, a former U.S.
`secretary of state and oil industry lawyer, to write an investigative report on the Texas City tragedy.
`One of the key findings highlighted in the Baker Report was that the company had cut back on
`maintenance and safety measures at the plant in order to curtail costs, and that responsibility for the
`explosion ultimately rested with company senior executives.16
`
`
`Another concern outlined in the report was that while BP had emphasized personal safety and
`achieved significant improvements, the company “has mistakenly interpreted improving personal
`injury rates as an indication of acceptable process safety, creating a false sense of confidence.”17 The
`report goes on to state the following:
`
`The Panel’s refinery-level interviews, the process safety culture survey, and some BP documents
`suggest that significant portions of the U.S. refinery workforce do not believe that process safety
`is a core value at BP. As many of the refinery interviewees pointed out, and as some BP
`documents and the process safety culture survey seem to confirm, one of the reasons for this
`belief is that BP’s executive and corporate refining management have not communicated a
`consistent and meaningful message about the importance of process safety and a firm conviction
`that process accidents are not acceptable. The inability of many in the workforce to perceive a
`consistent and meaningful corporate message about process safety is easy to understand given the
`number of “values” that BP articulates:
`
` •
`
` BP’s 18 “Group values,” only one of which encompasses health and safety—the
`company’s broad, aspirational goal of “no accidents, no harm to people, and no harm to
`the environment.”
`• Four “Brand values,” which BP claims, “underpin everything we do”: being performance
`driven, innovative, progressive, and green.
`
`
`None of these relates to safety.
`
`These messages to the BP workforce on so many values and priorities contribute to a dilution of
`the effectiveness of any management message on process safety. This is consistent with a recent
`observation from the organizational expert that BP retained under the 2005 OSHA settlement
`relating to Texas City: There appears to be no one, over-arching, clearly-stated worksite policy at
`Texas City, regardless of respondents’ answers. The BP stated policy on health and safety, “no
`
`
`16 James Baker et al., “The Report of the BP U.S. Refineries Independent Safety Review Panel,” January 2007. pp. 82-85.
`17 Ibid, p. 72.
`
`Rev. April 3, 2012
`
`5
`
`5 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`accidents, no harm to people and no damage to the environment” is not widely known at Texas
`City and points to a weak connection between BP Texas City and BP as a corporation. Safety
`communication is viewed more as a function of particular individuals in Texas City versus a BP-
`wide commitment.
`
`Until BP’s management, from the Group Chief Executive down through the refinery
`superintendents, consistently articulates a clear message on process safety, it will be difficult to
`persuade the refining workforce that BP is truly committed on a long-term basis to process safety
`excellence.18
`
`
`In March 2006, as The Baker Report was being written, a second disaster struck BP, this time in
`Alaska’s Prudhoe Bay, where more than 200,000 gallons of oil poured into the bay from a corroded
`hole in the pipeline, making it the largest oil spill in Alaska.19 Inspectors found that several miles of
`the steel pipe had corroded to dangerously thin levels. Alaskan state regulators had been warning BP
`since 2001 that its management procedures were out of alignment with state regulations, and that
`critical equipment needed to be better maintained.
`
`BP took several actions in response to The Baker Report and other reports, including one that was
`overseen by John Mogford, a senior group vice president of safety for BPX, on its safety. According
`to Appendix F, a supplement to The Baker Report, these actions included:
`
`
`• Leadership visibility. John Browne, BP’s group chief executive, met with the company’s top
`200 leaders to stress BP’s commitment to safety and communicate his expectations regarding
`safety. Members of the new Safety and Operations organization visited BP’s U.S. refineries
`and gave presentations regarding the importance of process safety and the importance of the
`Mogford Report recommendations. Additionally, BP senior managers have attended town
`hall meetings with employees to discuss safety issues. The chief executive, Refining and
`Marketing, conducted meetings for all U.S. refining employees, and the president of BP
`America conducted meetings and sent written communications to BP America employees
`regarding safety issues.
`• Review of employee concerns. BP appointed retired United States District Judge Stanley
`Sporkin to hear and review BP employee concerns.
`• Auditing. The Safety and Operations organization is creating an enhanced audit function,
`including additional audit personnel and a number of external hires. BP has listed audit-
`finding closure as one element of a six-point plan for sustained development. The new audit
`group is developing enhanced audit protocols to better assess actual operations against
`applicable standards.
`
`
`18 Ibid, p. 61.
`19 Abrahm Lustgarten and Ryan Knutson, “Reports at BP over Years Find History of Problems,” Washington Post, June 8, 2010.
`
`Rev. April 3, 2012
`
`6
`
`6 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`• Resources for plant, equipment, and systems. BP has announced that it has earmarked $7
`billion over the next four years to upgrade all aspects of safety at its U.S. refineries and to
`repair and replace infield pipelines in Alaska. The company has also announced $300 million
`in funding and significant external input for process safety management renewal in refining.
`
`  
`Though some of these changes were company-wide, many were specific either to Texas City or the
`refinery operations within BP.20 Still, BP executives clearly realized that when it came to safety, there
`was room for improvement.21 Between June 2007 and February 2010, 97% (829 of 851) of the willful
`safety violations by an oil refinery handed down by the Occupational Safety and Health
`Administration went to two BP-owned refineries in Texas and Ohio.22
`
`The Macondo Well Project
`The Macondo Prospect was located 52 miles south of the port of Venice, Louisiana in the Gulf of
`Mexico. At nearly 5,000 feet below sea level, the well demonstrated great potential for extracting oil,
`but was also somewhat hazardous. Natural gas levels were high in the reservoirs, which made drilling
`challenging.23
`
`Drilling in deep water and ultra-deep water24 started to become economically profitable and
`technically feasible on a large scale in the mid-2000s, due to higher world prices for crude oil and
`improvements in drilling technology. The number of deep water rigs in the Gulf of Mexico increased
`from just three in 1992 to 36 in 2008.25 Because of the complexities of deep water operations, creating
`a productive deep water oil field was extremely expensive compared to shallow water oil drilling. But
`the potential payoff was enticing. A well producing in shallow water might yield a few thousand
`barrels of oil a day. By contrast, deep water wells could yield more than 10,000 barrels per day.26
`
`BP acquired the rights to the Macondo Prospect from the U.S. Minerals Management Service in
`March of 2009.27 As the oil industry regulator, the MMS issued permits to oil companies wanting to
`drill on U.S. land or in U.S. waters. In exchange, it received royalty revenue from oil companies. BP
`was the principal developer and operator of the prospect and held a 65% financial share in the
`project.28 While BP maintained operational decision-making authority, Transocean employees, who
`performed the majority of the work on the rig, had some decision-making authority over operations
`
`20 Baker Report Appendix F – BP post Texas City Measures. p. F-1.
`21The BP U.S. Refineries Independent Safety Review Panel, 2007.
`22 Pierre Thomas, Lisa A. Jones, Jack Cloherty, and Jason Ryan, “BP’s Dismal Safety Record,” ABC World News, May 27, 2010.
`23 http://www.deepwaterinvestigation.com/external/content/document/3043/856507/1/7-23-10.pdf p. 70.
`24 “Ultra-deep water” is considered water 5000 or more feet below sea level.
`25Lesley D. Nixon et al, “Deepwater Gulf of Mexico 2009: Interim Report of 2008 Highlights,” OCS Report (New Orleans: U.S. Department of the Interior
`Minerals Management Service Gulf of Mexico OCS Region), May 2009.
`26 Fred H. Bartlit, Jr., Chief Counsel, National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. Macondo Gulf Oil Disaster Chief
`Counsel’s Report 2011, February 17, 2011.
`27 “Macondo,” SUBSEAIQ, (http://www.subseaiq.com/Data/Project.aspx?project_Id=562) accessed October 10, 2010.
`28 BP’s financial partners for Macondo were Texas-based Anadarko Petroleum Corporation which owned a 25% share, and MOEX Offshore 2007, a unit of
`Japan-based Mitsui, which owned a 10% share.
`
`Rev. April 3, 2012
`
`7
`
`7 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`and maintenance. BP started drilling the Macondo well in October of 2009. Drilling, however, was
`interrupted in the aftermath of Hurricane Ida. BP commenced drilling on February 3, 2010 leasing
`Transocean’s Deepwater Horizon rig.29
`
`Transocean charged BP approximately $500,000 per day to lease the rig, plus roughly the same
`amount in contractor fees.30 BP originally estimated that drilling the Macondo well would take 51
`days and cost approximately $96 million. By April 20, 2010 the rig was already on its 80th day on
`location and had far exceeded its original budget. 31
`
`The Deepwater Horizon Rig
`The Deepwater Horizon rig came with a long list of maintenance issues. In September 2009, BP
`conducted a safety audit on the rig, which was in use at another BP drilling site at the time. The audit
`identified 390 repairs that needed immediate attention and would require more than 3,500 hours of
`labor to fix.32 It was later learned that the Deepwater Horizon had not gone to dry-dock for nine years
`previous to the disaster and never stopped working at any point between the September 2009 audit
`and April 20, 2010.33
`
`As Transocean’s Chief Electronics Technician Mike Williams experienced, the crew had to be adept
`at developing workarounds in order to maintain the function of the rig. Williams was responsible for
`maintaining the Drilling Chairs — the three oversight computers that controlled the drilling
`technology. These computers, operating on a mid-1990s era Windows NT operating system, would
`frequently freeze. If Chair A went down the driller would have to go to Chair B in order to maintain
`control of the well. If somehow all three chairs went down at once, the drill would be completely out
`of control.34 Williams frequently reported the software problems and the need to have them fixed.35
`
`Despite the hazards of the Macondo well site, the known maintenance issues on the rig, and the
`setbacks that had caused the project to be over budget, BP felt confident that it had found oil.
`However, since the Deepwater Horizon was an exploratory vessel, the crew was under orders to close
`the well temporarily36 and return later with another rig to extract the oil.
`
`
`29 “Macondo,” SUBSEAIQ, (http://www.subseaiq.com/Data/Project.aspx?project_Id=562) accessed October 10, 2010.
`30 Ben Casselman and Russell Gold, “BP Decisions Set Stage for Disaster,” Wall Street Journal, May 27, 2010.
`31 BP, GOM Exploration Wells Me 252 #1 - Macondo Prospect Well information (Sept 2009) (BP-HZN-CEC008714)
`(http://energycommerce.house.gov/documents/20100614).
`32 Robbie Brown, “After Another Close Call, Transocean Changed the Rules,” The New York Times, August 16, 2010.
`33 Ibid; Testimony from Michael Williams, The Joint United States Coast Guard/The Bureau of Ocean Energy Management, “FUSCG/BOEM Marine Board of
`Investigation into the marine casualty, explosion, fire, pollution, and sinking of mobile offshore drilling unit deepwater horizon, with loss of life in the Gulf of
`Mexico 21-22 April 2010,” Transcript, July 23, 2010, p. 153.
`34 Ibid, pp. 42-44.
`35 Ibid, pp. 98-102.
`36 “Temporary abandonment” is the industry term for temporarily closing but not plugging a well.
`
`Rev. April 3, 2012
`
`8
`
`8 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`Anatomy of a Disaster
`While the process of closing a well is always complex, closing the Macondo well proved particularly
`so due to competing interests of cost, time and safety, as well as the number of people and
`organizations involved in the decision-making process. (See Exhibit 1.) As one example, 11
`companies37 played a role in the construction of the casing38 for the Macondo well, all with different
`responsibilities for various aspects of setting the well. Halliburton, for instance, was responsible for
`cement-related decisions, although many of these decisions were contingent on decisions made by BP
`managers on well design.
`
`Adding to the complexities of decision making on the Deepwater Horizon was the fact that many of
`BP’s decision makers for the Macondo well had only been in their positions for a short time before
`disaster struck. See Figure 1.
`
`Figure 1 Deepwater Horizon Chain of Command
`
`
`Name
`
`Title
`
`Days/Months in Position
`
`Patrick O’Bryan
`
`David Rich
`David Sims
`
`Robert Kaluza
`Greg Walz
`
`VP, Drilling and
`Completions, Gulf
`of Mexico
`Wells Manager
`Drilling Operations
`Manager
`Well Site Leader
`Drilling
`Engineering Team
`Leader
`
`3 months
`
`6 months
`18 days
`
`4 days
`18 days (took David Sims’s
`previous position)
`
`Note: Exhibit 2 is a corrected version based on court testimonies that includes full names and titles.
`Source: BP as presented at the hearings of the US Coast Guard and the Interior Department’s Bureau of Ocean Management,
`Regulation and Enforcement, August 26, 2010.
`
`As the Deepwater Horizon Disaster was dissected in various public forums, questions arose as to
`whether, in concert with the chaotic mix of decision makers, three key decisions on closing the
`Macondo well played a role in the downing of the 33,000 ton oil rig. (U.S. Congressional
`Representatives Henry Waxman and Bart Stupak called out these decisions in a letter dated June 14,
`2010 to BP CEO Tony Hayward just days before his testimony before the Subcommittee on
`Oversight and Investigations. See Exhibit 3.)
`
`
`
`
`
`
`37 BP, Weatherford, Hydril, Allamon, Blackhawk, Halliburton, Schlumberger, Sperry, M-I SWACO, Nexen, and K&B.
`38 Casing is the lining of the drilled well hole. Ensuring a sound casing is essential to preventing any oil or gas leakage and maintaining the well as a resource
`for future oil production.
`
`Rev. April 3, 2012
`
`9
`
`9 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`Well Casing
`Deep water wells are drilled in sections. The process of deep water drilling involves drilling through
`rock at the bottom of the ocean, installing and cementing casing to secure the well hole, then drilling
`deeper and repeating the process. On April 9, 2010, the crew of the Deepwater Horizon finished
`drilling the last section of the well, which extended 18,360 feet below sea level and 1,192 feet below
`the casing that had previously been inserted into the well.39
`
`During the week of April 12, BP project managers had to decide how best to secure the well’s final
`1,192-foot section. One option involved hanging a steel tube called a liner from a liner hanger on the
`bottom of the casing already in the well and then inserting another steel liner tube called a “tieback”
`on top of the liner hanger. The liner/tieback casing option provided four barriers of protection against
`gas and oil leaks getting into the well accidentally. These barriers included the cement at the bottom
`of the well, the hanger seal that attaches the liner to the existing casing in the well, the cement that
`secures the tieback on top of the liner, and the seal at the wellhead.40
`
`The other casing option, known as “long string casing,” involved running a single string of steel
`casing from the seafloor all the way to the bottom of the well. (Both options are depicted in Figure
`2.) Long string casing provided two barriers to the flow of gas up the annular space that surrounded
`the casing: the cement at the bottom of the well and the seal at the wellhead. Compared to the liner
`tie-back option, the long string casing option took fewer days to install.
`
`Figure 2 Diagram of a Liner
`
`
`
`
`
`
`
`
`
`
`
`Diagram of a Casing String
`
`
`
`Note: Pipe is run into the wellbore and
`cemented in place to protect aquifers, to
`provide pressure integrity and to ensure
`isolation of producing formations.
`
`
`
`Note: A liner completion incorporates a short casing string,
`hung off from a predetermined point in the intermediate
`casing string. This provides several benefits, including
`reduced material cost and greater flexibility in the selection
`of completion components in the upper wellbore area.
`
`Source: Schlumberger.
`
`
`
`
`39 BP, PowerPoint Presentation, Washington Briefing, Deepwater Horizon Interim Incident Investigation, May 24, 2010.
`40 Briefing by Tommy Roth, Vice President of Cementing, Halliburton, to House Committee on Energy and Commerce Staff (June 3, 2010); Halliburton,
`PowerPoint Presentation, Energy and Commerce Committee Staff Briefing (June 3, 2010).
`
`Rev. April 3, 2012
`
`10
`
`10 of 28
`
`Ex. 2062
`IPR2016-01517
`
`

`

`BP AND THE DEEPWATER HORIZON DISASTER OF 2010
`Christina Ingersoll, Richard M. Locke, Cate Reavis
`
`
`
`The decision about which casing design to use changed several times during the month of April. A
`BP Forward Plan Review from mid-April 2010 recommended against using long string casing
`because of the inherent risks of having fewer gas barriers. But internal communications within BP
`indicated the company was actually leaning towards using the long string casing option. On March
`25, 2010,