Cut and Crap

Posted on 06/01/2010 at 6:22 pm by Bob Cesca

Jed Lewison calls bullshit on BP’s “cut and cap” solution:

The only problem with BP’s “cut and cap” operation is that it won’t cap anything. At best, it will allow BP to salvage some of the oil (hopefully a substantial amount), but it won’t stop the leak, and it won’t keep oil from escaping. And whenever there’s a serious storm, the drill site will need to be abandoned, and the oil will flow without restriction, just as has been for the past six weeks, except the flow rate will be around 20% greater because the salvage operation requires BP to make a clean cut on its riser piping, giving BP’s containment dome easier access to the leaking oil at the expense of increasing the flowrate.

Yep. They’re just drinking as much milkshake as possible. This is all about mitigating loss and increasing profit. This isn’t a conspiracy theory — it’s the very nature of corporations.

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  • Irish Girl

    I still agree with you Bob. We could stop it with a bomb, any time we want. “We”, meaning the govt and BP just don’t want to. After all, the money to be made by drinking the milkshake, getting BP to pay out penalties, getting BP to pay off wages lost for fishermen, and getting them to cover the cost of clean up is an economic boon….It’s a harsh assessment but ultimately the only explanation I can think of for not using a bomb to simply put an end to it.

  • Michale32086

    I have always thought of the wisdom of just dropping a nuke on the site…That far below the sea the effects topside would be negligible..As for the environmental impact, it simply CAN’T be much worse than what is happening now…
    “Nuke ‘em. Nuke the bastards.”-President Whitmore, INDEPENDENCE DAY

    Michale32086

  • Michale32086

    Sorry I got carried away with the tags.. I am new here and trying to feel out how things are set up..Michale32086

  • http://politicalpartypooper.wordpress.com/ Political Party Pooper

    They can try to drink milkshake all they want. The writing is already on the wall. The short selling is working, THEY ARE GOING DOWN.Bob…did you notice where their stock price is after today?I’m just laughing…calmly…quietly…expectantly.:D

  • Allen Frederick

    I hate being put in the position of defending a corporation, because I believe they are the greatest scourge in history. Nonetheless …Look at the market cap. If the market is punishing them this bad for not capping the well it simply doesn’t make sense that they are deliberately not capping it.They have already tried – and failed – to plug it up. Twice. Bob – are you saying they deliberately failed at those attempts so they could get to this “cut and cap” strategy?

  • JackDanieL

    Careful what you wish for Michale – Bob linked to an excellent article the other day regarding the possible negative impact of detonating such a device at that depth.The bit about miles of water “flashing” to steam, and that radioactive steam finding a way, ANY way, up (like perhaps through an unknown fissure sitting beneath a preschool or something), is a nightmare scenario in my opinion – not that the current situation is ok…Regardless, welcome to the blog bud, stick around!

  • Michale32086

    JackDaniel,Careful what you wish for Michale – Bob linked to an excellent article the other day regarding the possible negative impact of detonating such a device at that depth. I’ll have to find that…But it seems to me that, as I said that, that far down, the impact to the environment would be a LOT less than the oil itself…Regardless, welcome to the blog bud, stick around!Thanx, but you might come to regret that invitation.. :D Michale32086

  • Allonfla

    Please tell me what engineer or scientist said nuking would cause only minor damage?

  • R & T

    I will agree with you that, the very nature of corporations is to mitigate loss and increase profit. But, since that is true, the only logical conclusion to be taken from that statement, is that it is in BP’s best interest to stop the oil leak as fast as possible. The downside to their liability from not stopping the flow of oil, far exceeds any other factor.Of course they will try and salvage oil, but your implication seems to be that this somehow is more of a driving force because of profit, than actually stopping the leak, which if true, would mean that they would be operating opposite to “the very nature of corporations”.

  • Allen Frederick

    Bob – I ask again:Are you saying BP deliberately failed at the initial attempts (two separate tries) to cap the well, so they could get to the “cut and cap” strategy and siphon instead?Yes or no?

  • Allen Frederick

    Also, who is Jed Lewison? From what I read on his site, his credentials are “teaching myself how to create videos for the internet”, and a B.A. in something from Yale. No engineering background. Does he even know what’s really involved in trying to cap this well? Frankly, he’s not a credibly source of opinion other than “corporations …. baaaaaddd.”Again Bob – Are you saying BP deliberately failed at the initial attempts (two separate tries) to cap the well, so they could get to the “cut and cap” strategy and siphon instead?Yes or no?

  • ec

    Allen,I have spent the better part of the last fifteen years analyzing the environmental performance of companies from a finance perspective and I agree with Bob.The risk analysis departments of these companies are stocked with lawyers, not engineers. I would be surprised if there was much interaction between the two groups.BP is looking at the Exxon Valdez outcome of lawsuits and figuring that they are sitting pretty. They also know that the chances of increased regulation in their industry is small to nil. So, they are going to go for the solutions that allow them to gather as much oil from this facility as possible.I am not saying that they deliberately failed, I am just saying that their choices of actions are the ones that will allow them to siphon off as much oil as possible.The long term effects of their actions are likely not important.

  • Allen Frederick

    “The risk analysis departments of these companies are stocked with lawyers, not engineers.”It doesn’t appear the market thinks the same as their lawyers, does it? Again, you simply cannot argue with the beating in market cap BP has taken since the spill began. Sorry, this point is irrefutable. What do you think would have happened to their market cap if the “junk shot” had completely stopped the leak? It’s obvious. Just as obvious is what happened when it didn’t work and they announced “cut and cap”. Again, irrefutable. The market is interested in potential profit and they have made their position clear.”they are going to go for the solutions that allow them to gather as much oil from this facility as possible.”As noted, capping it was the solution to get the most oil. What they’re doing now will cause them to LOSE oil in comparison. They’re not going to siphon 100%. Not even close.Also, I’m not arguing that they are not going to try and get some of the oil. If what they’re doing is redirecting it to the surface, why wouldn’t they? I’m arguing that they would have capped it if they could, they just can’t. It’s too hard of an engineering project right now at that pressure. Bob was arguing that they are deliberately engaging in some scheme to siphon oil INSTEAD of capping it, which it seems you are arguing too. Sorry, that’s nuts.I think it’s counterproductive when what we should focus on is the obvious: they clean up even if that means liquidation of BP. They pay all damages even if that means liquidation of BP. Proper regulation, etc … This conspiracy stuff is a distraction, and an unnecessary one.

  • ec

    Allen, it is not conspiracy stuff. We are discussing the cold hard facts of cost/benefit analysis in corporate decision making.The market drop is largely due to the uncertainty surrounding the outcome of this “spill”. Shareholders know that BP currently has all the financial resources it needs to handle the costs. Frankly, I am surprised that the price hasn’t dropped even more than it has.But, remember that Union Carbide stock recovered from Bhopal and BP’s will too.What I find more disturbing is that other oil company stock prices have not dropped more. To me, this indicates that investors do not believe that there will be significant new regulations coming out of this.

  • Allen Frederick

    You still didn’t answer my questions.”The cold hard facts of cost/benefit analysis in corporate decision making” would indicate capping the well is the best strategy. I’ve provided facts. You’ve provided cliche conjecture.