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BP: No Smoking Gun in Oil Spill

The report from BP on the cause of the oil spill argues there is no smoking gun from a grossly negligent BP that caused the Gulf of Mexico oil spill disaster.

NEW YORK (

TheStreet

) --

BP

(BP) - Get Report

said Wednesday it's far from the only one to blame, and there is no single cause for the Deepwater Horizon rig disaster and Gulf of Mexico oil spill. The key phrase in the BP report which will figure prominently in the protracted legal and regulatory wrangling in the aftermath of the oil spill is "multiple companies, and work teams contributed to the accident."

For "multiple companies" investors can read between the lines without even delving more deeply into the BP report to rig operator

Transocean

(RIG) - Get Report

and deep-sea engineer

Halliburton

(HAL) - Get Report

, responsible for cementing the Macondo well. Or one can just read the comment from outgoing BP CEO Tony Hayward that accompanied the report: "Multiple parties, including BP, Halliburton and Transocean, were involved."

The word "accident" itself takes issue with any argument that BP was "grossly negligent" in its actions leading up to the oil spill disaster.

The BP message that there is no single cause for the oil spill won't come as a surprise to many investors, regulators or the public. BP has made the case all along that there is no smoking gun linking gross negligence on the part of the British oil giant to the oil spill. The expectation was that BP would attempt to spread the blame around, without making it seem as if it was trying to shirk responsibility itself, and the report more or less accomplishes this task.

In any event, here are some brief highlights from the executive summary of the report provided by BP.

The exact wording from BP about the no single cause argument: "no single factor caused the Macondo well tragedy. Rather, a sequence of failures involving a number of different parties led to the explosion and fire which killed 11 people and caused widespread pollution in the Gulf of Mexico earlier this year."

The oil spill was the result of "a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces."

That phrase should keep the courts busy for years to come. One sticking point in the phrase, however, is that BP has said all along that its engineering design was not to blame for the oil spill. In his testimony before Congress, outgoing CEO Hayward was grilled about the design of the well and the choices related to the final cementing completed by Halliburton.

Testimony provided to Congress by the top executives at the other major integrated global oil companies indicated that BP's well design was flawed and would not be used by any of these companies as an industry standard.

BP is sticking to that line now, and saying that Halliburton botched the job, not that the design itself was flawed. "Based on the report, it would appear unlikely that the well design contributed to the incident, as the investigation found that the hydrocarbons flowed up the production casing through the bottom of the well," Hayward said in a statement accompanying the release of the report.

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Hayward called it a "bad cement job."

As far as the pressure tests that were incorrectly analyzed, BP is sharing the blame with Transocean, arguing that "the results of the negative pressure test were incorrectly accepted by BP and Transocean, although well integrity had not been established."

BP's use of the phrase "widespread pollution in the Gulf of Mexico", in the least, is a change from outgoing Hayward's infamous reference in the early days of the disaster to the minimal environment impact from the oil spill.

The BP executive summary of the report -- based on a four-month investigation led by Mark Bly, BP's head of safety and operations found that:

The cement and shoe track barriers -- and in particular the cement slurry that was used -- at the bottom of the Macondo well failed to contain hydrocarbons within the reservoir, as they were designed to do, and allowed gas and liquids to flow up the production casing;

The results of the negative pressure test were incorrectly accepted by BP and Transocean, although well integrity had not been established;

Over a 40-minute period, the Transocean rig crew failed to recognize and act on the influx of hydrocarbons into the well until the hydrocarbons were in the riser and rapidly flowing to the surface;

After the well-flow reached the rig it was routed to a mud-gas separator, causing gas to be vented directly on to the rig rather than being diverted overboard;

The flow of gas into the engine rooms through the ventilation system created a potential for ignition which the rig's fire and gas system did not prevent;

Even after explosion and fire had disabled its crew-operated controls, the rig's blow-out preventer on the sea-bed should have activated automatically to seal the well. But it failed to operate, probably because critical components were not working.

BP's recommendations in the report for best practices run the gamut of potential reasons for the oil spill, from strengthening assurance on blow-out preventers, well control, pressure-testing for well integrity, emergency systems, cement testing, rig audit and verification, and personnel competence.

The much-anticipated interim report from BP about the oil spill, released early on Wednesday morning, is a 200-page document, so the oil spill blame game has turned a new page, but is far from near its conclusion.

-- Written by Eric Rosenbaum from New York.

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