Legacy of the BP spill: What's a reputation worth?
The BP spill in the Gulf of Mexico caused a public outcry and savaged BP's share price. Image repair won't be easy.
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Subsequent events undercut that promise. On his watch, BP has been fined $87 million – the largest fine in the history of the US Occupational Safety & Health Administration (OSHA) – for failing to address problems identified after the Texas City disaster. "BP appears to have had a corporate blind spot relating to process safety," concluded a report chaired by former Secretary of State James Baker.Skip to next paragraph
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In recent years, the British oil giant had grown to be the largest producer in the Gulf of Mexico, pushing to deeper depths and reaping big returns. A year ago, BP announced a 500-million barrel discovery in the Gulf, the Tiber field, and saw its share price rise 4 percent in a single day. This came on the heels of another giant find, the Kaskida field, which BP had successfully drilled with Transocean, and the Deepwater Horizon.
BP's bold – some would say risky – moves in the Gulf were in sharp contrast to those of ExxonMobil. In 2005, Exxon pulled out of the Blackbeard West site in the Gulf, saying it could not be "safely continued." It had spent $180 billion and was only 2,000 feet from reaching an estimated 1 billion-barrel oil field. At the time, industry analysts and journalists lambasted Exxon for lacking "guts."
In retrospect, the Blackbeard retreat and a recent merger with US natural-gas firm XTO Energy reflect "classic long-term ExxonMobil strategy," said Paul Sankey, an analyst at Deutsche Bank, in a June report. The XTO merger turned Exxon into the United States' largest natural-gas producer – an important diversification step at a time when oil is becoming riskier and more costly to produce.
Despite Exxon's impressive safety record – one OSHA violation in the last five years – its name still leaves a bitter taste in the mouths of many Alaskans. The US oil titan led the small communities of Prince William Sound in a tightly choreographed legal dance, which ended only in 2008 and reduced a $5 billion damage settlement to $507 million. Some plaintiffs got a final payment of 6 cents.
A less forgiving environment for firms
Unlike in 1989, companies today operate in a "24/7 risk environment," says Mr. Loeb. Two key factors are behind the change: the advent of social media and the growth in influence of environmental and other nongovernmental organizations offering a "much greater check-and-balance system on corporate behavior." While social media involves risks, he added, it also offers companies "an extraordinary opportunity to break through the static of information flow to tell your own story."
BP has been successful "reactively" in controlling the narrative, but needs to work more "proactively" in the blizzard of litigation that casts the oil company as Goliath against a Gulf Coast of Davids, says a communications consultant, who asked not to be named because he is working for BP.
The importance of reputation is also key in terms of political leverage, says Mark Swanson, who has worked for the Coast Guard, Shell, and now as director of a citizen-led oil industry oversight body in Prince William Sound set up after the Valdez spill.
Time may be on BP's side. The oil industry's Washington cheerleaders are currently choosing their words carefully. But as outrage fades, they will again be reminding Congress about the importance of domestic oil production. "The court of public opinion only goes so far," says Mr. Swanson.