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BP was even willing to take the callous step of assigning a value to human lives for the purposes of Cost Benefit Analysis. What’s more, the analysis was weighted to favor the cheapest method, not necessarily the safest. BP even went so far as to compare their workers to the three little pigs in the famous children’s story.
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1999 - The Merger
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In early 1999, BP merged with Amoco. The new entity was called BP Amoco, although a few years later the name was shortened to BP. Almost immediately after the merger Lord John Browne of Madingley and other BP executives in London ordered a $1.4 billion permanent cut in fixed costs at all refineries worldwide. As a result, each refinery was given 3 years to reduce fixed cash costs by 25%, regardless of the age or condition of the facility. The Texas City refinery had already undergone years of budget cuts under Amoco, yet they were expected to cut an additional 25% out of their budget simply because the name of the company had changed.
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Tim Scruggs - Plant Manager in 1999
The orders came down from Lord Browne. WATCH VIDEO ***Lord Browne: In 1998 Edmond John Phillip Brown, the Chief Executive of BP , was knighted by Queen Elizabeth II taking the title Sir John Browne. Then in 2001 he became a member of the British House of Lords, with the new title of Lord Brown, Baron Browne of Madingley, of Cambridge in the County of Cambridgeshire. 7/15/1999– Message from Site Leadership RE: BP Amoco Strategy VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT George Carter –Operations Manager at BP Texas City in 1999 ”London ‘challenged’ Texas City to reduce costs by 25% WATCH VIDEO ***Fixed Cash Costs (FCC): Fixed Cash Costs at BP includes primarily spending for everyday maintenance and maintenance during turnarounds, personnel wages, training and replacing relatively inexpensive equipment. 10/1/1999– Texas City Business Unit Business Strategy VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT |
1999 - Texas City Cost Cuts
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The Texas City refinery initially planned on a 10% cost cut, but when the command to cut more came down from London, their plan to cut the budget changed. Instead, they intended to exceed the required cuts by initiating a plan that would cut their fixed cash costs by 28% over three years. In 1999, they made deep cuts in nearly every major area of the plant. They cut dozens of safety related programs, they also deferred required maintenance and scheduled turnarounds, reduced staffing (including a dramatic cut in the number of inspectors), and slashed the training budget. In an ultra hazardous job like a refinery, proper staffing levels, maintenance and training aren’t just budget items that can be reduced on the whim of management—they are essential in order to prevent injuries and fatalities. Years later, BP employees would call this the era of “Getting More Squeal Out of the Pig.”
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George Carter –Operations Manager at BP Texas City in 1999
”Proposed Budget Cuts” WATCH VIDEO 3/23/1999– 10% Cash Reduction Case for Texas City Business Unit VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 4/1/1999 -99 Reduce Document VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT David Pierpoline – Manager of the Cedar Bayou Plant in 1999 ”Everything was Cut, Down to the Number of Pencils” WATCH VIDEO 9/2/1999– TCBU Strategy Update VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 8/2/2003– E-mail from Connie Morris: Refining Leadership Team Away Day VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT |
1999 - Other Refineries
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However, not all of the refineries in the BP system cut their budgets as drastically as Texas City. The Kwinana refinery in Australia took the budget cut “with a grain of salt” rather than sacrifice safety. The Whiting refinery in Indiana had a manager who apparently “knew how to play the BP game” and therefore avoid the dangerous cuts that took place at Texas City. Finally, one manager at the Coryton refinery told his superiors that a 25% budget cut was not safe because his plant, much like Texas City, had already undergone a decade of budget cuts with another company. His refusal to compromise the safety of his workers eventually led to his demotion.
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Kathleen Lucas - Plant Manager at Kwinana in 1999
Kwinana took the Lord Browne’s Budget Cuts with a “Grain of Salt” WATCH VIDEO Colin MacLean - Plant Manager at Whiting in 1999 Playing the “BP Game” at Whiting WATCH VIDEO 8/19/2002 - Email from James Hay VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT Paul Maslin - Plant Manager at Coryton in 1999 Compliance with the 25% Cost Cut was Non-sensical WATCH VIDEO ***Coryton Refinery: The Coryton refinery was originally built by Mobil in 1953 about 40 miles east of London. In 1997, BP and Mobil entered into a joint venture to run the plant. However, following the BP Amoco merger, the joint venture was dissolved and BP took over the refinery. Paul Maslin - Plant Manager at Coryton in 1999 Demoted for not cutting costs WATCH VIDEO |
1999 - 2004 Continued Cost Cutting at Texas City
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The 2002 Veba Report showed the poor state of the infrastructure, which caused BP to make some increases in spending. However, spending levels never reached their prior levels, nor were any funds allocated to make up for years of under investment. Furthermore, the Texas City Management team still faced constant pressures from London to lower costs. In fact, on the very day of the explosion, management expressed concerns about getting fired for overruns in spending that were critical to operate the plant safely.
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11/1/2000 –E-mail from Mark Polite re: Fixed Cost Cash Committee Meeting
VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 6/14/2001– E-mail from Martin Neep re: 2001 Capex Deferral VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 11/4/2002– E-mail from Don Parus re: The Challenge Continues VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 4/26/2004 Capex Session Prep VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 3/23/05 E-mail from Kathleen Lucas VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 11/14/2005– E-mail from Dennis Link re: Texas City Repositioning Project VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT |
2002 - 2004 Risking Lives
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BP was even willing to take the callous step of assigning a value to human lives for the purposes of Cost Benefit Analysis. What’s more, the analysis was weighted to favor the cheapest method, not necessarily the safest. BP even went so far as to compare their workers to the three little pigs in the famous children’s story.
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Stan Sorrels – Current HSE Manager at Whiting
"Cost of Human Life" WATCH VIDEO 3/4/1999– E-mail from Robert Mancini re: Risk Management and Assessment VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 8/2/2003 –E-mail from David Peirpoline re: Integrated Site Capex Process VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT John Manzoni – Global Refining Group Vice President (London) Three Little Pigs and The Big Bad Wolf WATCH VIDEO 10/17/20032– Group HSE Standard: Major Accident Risk Awareness Training VIEW HIGHLIGHT ONE - VIEW HIGHLIGHT TWO - DOWNLOAD DOCUMENT |
2005 Still Cutting Costs at Texas City
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By 2005, the margins in the oil refinery had improved dramatically from the lean years of the late 1990’s. Despite the fact that the Texas City plant was making record profits, BP’s upper management called for a further 25% cut, this time to capital costs. The decision to further reduce costs at Texas City was made despite the recognition by plant management that Texas City had a long history of underinvestment. Unfortunately, BP’s irresponsible focus on cost cutting still continues at BP Texas even after the explosion on March 23, 2005.
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Don Parus – Plant Manager at BP Texas City
BP Texas City was Printing Money WATCH VIDEO 3/17/2005– E-Mail Update from Don – March 2005 VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT Don Parus – Plant Manager at BP Texas City 2005 25% Cut in Capital Costs WATCH VIDEO ***Capital Budget: The Capital budget includes any expenses not covered by the fixed cash cost budget, such as replacing major pieces of equipment, extensive turnaround work, and new plant units. 11/5/2004 – E-mail from Don Parus: Texas City Capex Reduction Proposal VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT 6/17/2005– Texas City June Flash Update VIEW HIGHLIGHTS - DOWNLOAD DOCUMENT |