Exxon After Valdez: Lessons For BP?
ExxonMobil Corp. and BP have many things in common: They're both among the world's largest oil companies, both operate refineries and offshore platforms, and both rake in billions of dollars in profit. But when it comes to their U.S. safety record, the similarities end.
"In the last three years, when we look at refineries, 97 percent of the violations considered egregious and willful were given to BP. So, BP had 760. Exxon had one," says Pavel Molchanov, an oil and gas analyst at Raymond James. "That is a colossal difference."
Exxon does considerably better than the industry average on other safety-related measures, too.
Why The Difference?
Before the BP explosion in the Gulf of Mexico, the worst domestic oil spill was the Exxon Valdez in Alaska in 1989. Popular lore puts the blame on a drunken tanker captain, but the reality is more complex: Exxon, for example, was cited for failing to provide an appropriate crew and supervise it properly.
The accident gave the oil giant a jolt. Exxon spokesman Alan Jeffers says the Valdez spill marked a turning point for the company.
"It was very clear we needed to have a safety stand-down," he says. "So, we took a group of senior managers and supervisors, and their only job for several months was analyzing the business and where we needed to improve."
This wasn't just about public relations. Operating safely makes good economic sense. Exxon created an operations bible for risk management with guidelines and rules for just about everything -- from taking the temperature of salad dressing in the company cafeteria, to how to conduct deep-water drilling.
Safety Impacted Business Decisions
To illustrate the company's risk management approach, Jeffers offers the story of the Blackbeard well in the Gulf of Mexico. In 2006, Exxon had been drilling for more than a year and a half, and had spent nearly $200 million. But the drilling engineers encountered more difficult conditions than they had expected.
"The drillers came to the management and said, 'Here's what we found: We've done a risk assessment, and we don't think we can mitigate the risk to an acceptable level,' " Jeffers says.
And so, Jeffers says, the decision was made to discontinue operations and walk away from the project. BP may be wishing it had done the same with the Deepwater Horizon.
Difference In Company Policy
Tom Bower, author of the book Oil: Money, Politics, and Power in the 21st Century, says there are key differences between Exxon and BP. Exxon, he suggests, strips employees of the ability to make decisions on their own. They have to follow Exxon's rules and guidelines to the letter. Both initiative and risk are minimized. BP, says Bower, operated quite differently
BP "relied much more on people on the spot to prevent things from going wrong, but at the same time didn't have the mechanisms to prevent the accident in the first place, which Exxon has built into its system," Bower says.
Exxon and some of the other major oil companies are trying to distance themselves from BP and its Deepwater Horizon operations, telling members of Congress and others that BP was operating outside the mainstream. It's an effort, Bower says, to keep the focus on BP and minimize the impact of the spill, the scrutiny and the drilling curbs on them.
"I think Exxon is delighting in BP's discomfort. But on the other hand, the focus on the industry is bad for Exxon, too," Bower says.
Exxon Not Above Reproach
While Exxon's safety record is better than most of its peers', the company is not above reproach. Environmentalists and others are quick to point out that Exxon was slow in making the switch from single to double-hulled tankers. And, as the Sierra Club's Athan Manuel points out, Exxon bitterly fought a $5 billion punitive damage award stemming from the Valdez spill, and successfully got it reduced to about $500 million.
"They fought this for almost 20 years in the courts," Manuel says. "A lot of the fishermen who were impacted, a lot of those folks [have] died. Many families were never compensated, and it was a pretty shameful act of citizenship by Exxon."
Now BP is on the hot seat, and it may well look to Exxon as it considers its safety initiatives -- and perhaps its legal strategy.
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