BP CEO on Capitol Hill: Grill, Hayward, Grill!

BP CEO Tony Hayward heads to Capitol Hill Thursday to testify before Congress. Will Hayward steer clear of deep water, or will he get stuck in an oil spill of his own making?
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NEW YORK (

TheStreet

) --

BP

(BP) - Get Report

CEO Tony Hayward is often seen in photos wearing a BP hard hat. Hayward may very well need some protective head gear for the attacks he will face Thursday morning in testimony on Capitol Hill, to begin at 10 a.m. ET.

The best efforts by BP to stop the oil spill in the Gulf of Mexico, all failures, included the "top kill" and "junk shot." Now it is the turn of congressmen, high on their investigative dais, to unleash the interrogatory top kill in combat against what they probably expect will be a smattering of verbal junk shots from BP CEO Hayward.

The BP CEO seemed to be spared one line of potential attack on Wednesday, when, after a meeting at the White House with President Obama, BP went further than many expected in meeting immediate financial obligations to the Gulf coast, setting up a $20 billion escrow fund and agreeing to suspend its next three dividends, a value of between $7 billion and $8 billion lost for BP shareholders.

>>Why BP Bowed to Obama

Of course, with an analyst from Raymond James saying -- immediately after BP thought it had bought some breathing room -- that oil spill legal costs alone might reach as high as $62 billion, and

The New York Times

running a headline on Tuesday night that criminal charges against BP could make its liability unimaginable, Hayward's Capitol Hill testimony may be a minor obstacle for the British Petroleum giant.

>>BP to Place $20 Billion in Escrow

Even when BP tries to do the right thing, it tends to encounter some kind of verbal equivalent of an oil slick. Speaking outside the White House after agreeing to the dividend suspension, BP chairman Carl-Henric Svanberg thought he was doing the right thing by also issuing an apology to the "small people" of the Gulf coast. What might have been an honest mistake in the Swede's attempt to reach out to the American public in English quickly became fodder for new attacks on the deepwater oily ink squid otherwise known as BP.

Capitol Hill testimony is a delicate dance for under-fire executives. Hayward will not only have to stick to the talking points banged into his head by legal counsel, investor relations, public relations and political advisors, but try to not lose his cool at every attempt by congressman to score points by getting him to sabotage his own blowout preventer.

One never knows exactly in which direction the oil spill hearings will turn, either, or what we will learn from them. Few would have bet that as a result of Tuesday's testimony from the CEOs of

Exxon Mobil

(XOM) - Get Report

,

Chevron

(CVX) - Get Report

and

ConocoPhillips

(COP) - Get Report

, the American public would come away armed with the marine factoid that walruses have not existed in the Gulf of Mexico for three million years.

Though with a fair degree of certainty, we can predict the line of questioning on which the Hayward grilling will center. This is the Oversight and Investigations subcommitte of the House Energy and Commerce Committee, and it's all about uncovering the cause of the BP oil spill for these Capitol Hill sleuths. The House sent a letter to the BP CEO earlier this week laying out the questionable decisions made by BP in operating the well -- referred to by BP engineers in internal emails as a "nightmare well" -- in the events leading up to the oil spill.

The House subcommittee's top kill will most likely center on aspects of BP well operations laid out in the letter, which the CEOs of the other big oil companies already were happy to concede earlier this week were far from accepted industry best practices.

Here are the key terms to know:

Well Design:

The House letter to BP lays out the argument that when it came time for BP to install the final steel tubing in the well, the oil company decided to use a full string of "casing," as opposed to a "liner" and install a "tieback" over the line. The liner would have taken more time and been more expensive -- $7 million to $10 million more -- but would have been a safer option providing more protection against the escape of gas. As late as mid-April, a BP review outlined these risks but in the end the company opted for the less expensive, less time-consuming full string.

Centralizers:

The industry standard is to use 21 centralizers to make sure that when the final casing is installed it is centered properly. BP opted to use only 6 centralizers, against the advice of Halliburton, and internal BP emails show that the company was trying to speed through the process and was aware that it was taking a risk.

Cement Bond Log:

BP decided to not run a 9-hour to 12-hour cement bond log test, even after cementing simulations showed that successful cementing of the well was unlikely and after a warning from Halliburton of potential "severe gas flow problems. BP had a crew from Schlumberger on the rig on the morning of April 20 for the purpose of a cement bond log, but BP told them they weren't needed.

Mud Circulation:

Wells are generally filled with weighted mud during the drilling process, also known as heavy drilling mud, to test for gas influxes, safely remove any pockets of gas, and to eliminate debris prevent contamination of the cement. BP decided to forego this safety step, which could have taken 12 hours, and complete only a partial mud drilling exercise.

Lockdown Sleeve:

Because BP elected to use just a single string of casing, the well had just two barriers to gas flow: the cement at the bottom of the well and the seal at the wellhead on the sea floor. The lack of centralizers and decision not to run a cement bond log made the integrity of the seal assembly critical as the remaining barrier against an influx of hydrocarbons. BP did not deploy the casing hanger lockdown sleeve that would have prevented the seal from being blown out from below.

Ready to learn more about the evolution of walruses?

BP CEO Hayward has outlined his response to these House allegations of time and money saving recklessness on the part of BP in the opening statement of his testimony pre-released on Wednesday.

After a long apology from Hayward to the Gulf coast and about the ongoing oil spill crisis -- which even if offered in earnestness probably won't earn Hayward too many points with the "small people"-- Hayward's letter ends with what will probably be the primary materials loaded into his junk shot.

The biggest piece of junk comes in the last part of the opening statement, where Hayward responds directly to the issue of what caused the oil rig and well failure. "This is a complex accident, caused by an unprecedented combination of failures," Hayward will say. Hayward also will say that neither he nor anyone else at BP could "foresee" the events of April 20.

Sound familiar? It wasn't too long ago that the parade of bank executives bailed out by the federal government explained away the financial crisis with the "unprecedented series of events," or, perfect storm argument, and the claim that a debt crisis of this magnitude was impossible for anyone to foresee. Just last week in testimony before the Financial Crisis Inquiry Commission,

Warren Buffett

explained away the housing bubble by arguing that even someone as smart as Isaac Newton invested in bubbles.

Hayward better not invoke the Isaac Newton catch phrase to explain the gas bubbles coming out of the well, but he will make the subtle hint that BP is not alone among companies that could have caused the disaster, saying in his opening remarks, "A number of companies are involved, including BP." Additionally, if Hayward ever gets stuck in his answers, he can always rely on junk-shot material numero uno, stated in his opening testimony as, "it is simply too early to understand the cause."

It's notable that four of the seven items that made the BP CEO's short list are related to the blowout prevented made by

Cameron International

(CAM)

. The other companies whose liability remains an unknown include rig operator

Transocean

(RIG) - Get Report

, and

Anadarko Petroleum

(APC) - Get Report

, which owns 25% of the BP well.

Hayward did at least save us all some time and money by laying out what he sees as the 7 keys to the investigation into potential oil spill causes:

The cement that seals the reservoir from the well

The casing system, which seals the well bore

The pressure tests to confirm the well is sealed

The execution of procedures to detect and control hydrocarbons in thewell, including the use of the blowout preventer (BOP) and themaintenance of that BOP

The BOP Emergency Disconnect System, which can be activated bypushing a button at multiple locations on the rig;

The automatic closure of the BOP after its connection is lost with the rig;and...

Features in the BOP to allow ROVs to close the BOP and thereby seal the well at the seabed after a blowout

There you have it; lots of deep-water ground to cover in the BP CEP's attempts to steer clear of deep water. Not to worry Tony. In any event -- even an unprecedented series of events -- you'll have your life back after a few hours of Capitol Hill squirming. Though few might see that as a much to look forward to right now.

-- Reported by Eric Rosenbaum in New York.

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