BP America Head Responds to Key Alaska Oilfield Shutdown

This is a partial transcript from "Your World with Neil Cavuto," August 9, 2006, that was edited for clarity.

NEIL CAVUTO, HOST: BP on the hot seat again — first, the shutdown, now the fallout — in Alaska, the governor there putting a hiring freeze in place. He wants to go after the company for the costs to the state, which could be millions a day.

Now the man on the hot seat responds, Bob Malone, the president, chairman of BP America, telling me that his focus is on fixing the problem.

(BEGIN VIDEOTAPE)

BOB MALONE, CHAIRMAN & PRESIDENT, BP AMERICA: Well, right now, we have a number of people that are asking questions about not only what occurred, but what we should be doing, as — as a result of what has occurred.

I — right now, my focus is looking forward. There will be plenty of time to look in the rear mirror and from the learnings that we will have on this. My focus is looking forward at maintaining the production that we currently have of 200,000 barrels a day on the west side of the field, assuring us that it's safe, and seeing how quickly that we can bring up the east side of the field and the additional 200,000 barrels.

My focus right now...

CAVUTO: All right. So, what are we dealing with here? He — he is addressing, sir, as you know, the governor, a couple of hundred thousand barrels-plus that isn't online, and, conceivably couldn't be online for a while to come. Does he have a legitimate beef, sticking it to BP to pick up the lost income?

MALONE: Well, once again, Governor Murkowski and — and I — this is the first I have heard of this particular issue, but I expect there will be a lot of review of what occurred, and the accountability for that.

But, again, we're trying to get that production up as quickly as we possibly can, in a safe manner. And that's where my focus is right now.

CAVUTO: Well, my — here's — I — I'm no oil man, sir. But, apparently, these oil facilities have gotten significantly degraded, and — and the rap was that you hadn't adequately maintained them, to the point where they — they did have to be shut down for safety, environmental reasons, you name it.

How is it that the BP maintenance is so poor that — did you just wake up and say, geez, this is in horrible shape? What happened?

MALONE: We — every year, we invest approximately $200 million in integrity management. Seventy million of it — over $70 million, is in corrosion protection.

What has happened is, the downside of the field, as these fields have matured, we have ended up in the downstream lines that you wouldn't expect to find microbial corrosion. That's bacteria, or a bug, that eats the oil. And it secretes a substance that's acidic. So, these lines have spotted pits, where this microbial corrosion is occurring.

We didn't expect to find that. Our inhibitor, which we would use to normally kill that bacteria that we put in the line, it appears, is adhering itself to the sediments that you get from a well, and, therefore, not getting the full length of the pipeline. This was new to us. And we did not know of this...

CAVUTO: When was it new? When was it new? Because, from what I'm hearing so — the original pipeline, details that we're getting was that they themselves were completely corroded. So, when did this all hit you?

MALONE: Well, there's — there's the transit lines, which is this most recent shutdown, and the March incident that we had, those are what you might call downstream of the process center. We do corrosion between the wells and those processing centers and in those transit lines that we're speaking of today.

We have continually spent millions of dollars every month to corrode — to have corrosion protection on those pipelines. When we found out we had this bacteria growing was actually when we had the incident on the west side of the field in March. That's the reason that we discovered, and we're the ones that shut the pipeline down over the weekend, when electronic pigging, which is a sensor inside the pipeline...

CAVUTO: Right.

MALONE: ... found some areas that — that were of — of concern. And we were able to shut the line down before we had a potential incident.

CAVUTO: Let me ask you this. You had an issue with safety at a Texas refinery some years back. A number of people were killed. Now you have this particular issue.

Do you think people should resign at the company?

MALONE: Neil, I have been brought in to look at the integrity of our operations in the United States.

And I have been going around, for the last two months, visiting our facilities and talking to our leadership and our employees. And I have been impressed with the quality of our leadership. I have been impressed with our workers and the way they look. And — and they're holding it as a core value around integrity management.

I have not seen anything to date — now, I haven't been to all our facilities — to make me question the capabilities of our leadership or our employees.

CAVUTO: All right, Mr. Malone, thank you very much. We just appreciated those updates.

(END VIDEOTAPE)

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