Of BP and Bhopal
BP will no doubt take a financial hit of some small (in the scheme of things) proportion: BP oil spill clean-up costs rise to $1.25bn.
But, in the other hand, "BP's first-quarter [that's only 3 months, mind you] replacement cost profit was $5,598 million, compared with $2,387 million a year ago, an increase of 135%."
In the larger picture it might be said, "the oil company posted profits of $26bn last year".
Hell, even the shareholders might have to pony up lost opportunity costs if the political fallout from the Deepwater Disaster gets out of hand: Gulf of Mexico oil spill: BP to mull politics of shareholder dividend payments.
To be sure, the BP's British cheerleaders are doing their part to mitigate any damages to BP, if not the Gulf Coast. Simply look at that last story's headline from the UK's Telegraph. It wimply characterizes the Deepwater Disaster as a simple "oil spill". Oh Blimey, did I spot your rug? Oh tish!
Despite Tony Hayward's "idiotic remarks", the BP CEO is sounding almost Churchilian in his stiff upper lip fortitude: BP's Tony Hayward: I'm a Brit. I can take it.
The British bristling is perhaps best distilled in this bit of bloody whinging Pom pub talk from Bruce Anderson:
Any fair-minded person who examines the Gulf of Mexico oil spillage is compelled to two conclusions. First, that there is no evidence of wrongdoing by BP. Second, that the President of the United States has behaved disgracefully.
The history of the modern oil industry is punctuated by disasters: Exxon Valdez, Piper Alpha, Texas City. The history of modern aviation is also punctuated by disasters, too
In the Gulf of Mexico, there are difficulties with fishing and tourism. These should not be exaggerated. Some of the lemming media would have us believe that the Louisiana coast is inhabited by pre-lapsarian fisher-folk whose arcadian tranquility has now been violated by the brutalities of BP. Has anyone ever met an insurance claimant who understated his loss?
The real threat to Louisiana's economy, and to America's, comes from President Obama.
In the Liberal media, Mr Obama's rhetorical skills have been grotesquely overrated. He is not a good speaker. Presidents Reagan and Clinton were naturals, while George Bush Jnr could give a superb performance from a prepared text. But Barack Obama's delivery is cold and introverted. The presidency is a strange office, its incumbents caught between regular illusions of omnipotence and equally regular frustrations of Congressional constraint. The only way to break out of Lilliput is to use the White House as a bully pulpit. This President cannot do that, because he cannot make Americans feel good about themselves.
There may be an explanation for this. Nobody knows what Mr Obama believes. During his brief period in the Senate, he took ultra-left wing positions on almost everything. This delighted Democrat activists, and turned him into a presidential candidate. Once he had secured his base, he dumped almost all the leftism in pursuit of electability. That means a chronic political crisis.
Instead, he has to defame BP. To listen to Mr Obama, one might have thought that BP was run by George III and Lord North, with Lord Cornwallis in charge of safety – and there is worse.
It has been 10 years since BP stopped calling itself British Petroleum (patriots could be tempted to conclude that its present misfortunes are divine punishment). Yet the President constantly reverts to the old name, as if "British" were a term of abuse. Not only is Britain the US's most important ally. BP has 24,000 American employees and 10,000 British ones. So when he denigrates this great company, Mr Obama is damaging US interests as well as British ones.
The international left has always hated the oil industry; the oil well and the motor car are two of capitalism's principal heraldic devices. It might have been hoped that the anti-oil nonsense would subside with the blowout of Marxism: not so. The poisonous gases merely found another vent: the extremities of the Green movement, and especially Greenpeace, which would like to deny mankind the energy resources upon which civilisation depends.
So, on this note of poisonous gases found in other vents, Guambat segues to another gas: acetylene.
The Union Carbide & Carbon Corp. (UCC) was formed in 1917 from the combination of four companies: Union Carbide Co. (incorporated 1898), Linde Air Products Co. (incorporated 1907), National Carbon Co., Inc. (incorporated 1899), and Prest-O-Lite Co., Inc. (incorporated 1913). The new entity was organized as a holding company, with its four members acting relatively autonomously and cooperating where their businesses converged.This is part of the beginnings and history of Union Carbide, a US company, not at all British, although both companies might be more critically aligned as Global powerhouses:
The merger combined what had often been competing interests to form an industrial chemicals powerhouse. The oldest member of the quartet, Union Carbide, had been formed to manufacture calcium carbide, which was used in the production of metal alloys. A by-product of alloying calcium carbide with aluminum was acetylene, a gas that company executives hoped would prove useful for street and household lighting. But when Thomas Edison's electric incandescent light bulbs proved more practical for most lighting, it looked as if Union Carbide's acetylene lighting business was obsolete. Luckily, a French researcher discovered that acetylene could be burned in oxygen to produce a hot, metal-cutting flame. A whole new market for the gas emerged, and UCC was ready to take advantage of it.In 1999, Dow Chemical bought out Union Carbide, and thereafter, became a wholly owned subsidiary of Dow Chemical Company on February 6, 2001, following completion of its settlement and opening of The Bhopal Memorial Hospital and Research Centre, ending its chapter in India.
Union Carbide had been involved with the Linde Air Products Co. through joint acetylene experiments for about six years before the formation of the UCC holding company. As one of America's first oxygen-producing concerns and (after 1917) part of one of the country's largest chemical companies, Linde soon became the world's largest producer of industrial gases like acetylene, hydrogen and nitrogen. These gases formed the foundation of the petrochemical industry.
With combined research efforts and a national push for new technologies to help win World War I, new developments came in rapid succession at Union Carbide. New products included batteries for portable radios and corrosion and heat-resistant ferroalloys that strengthened the steel used to build skyscrapers, bridges, and automobiles. The government's need for ethylene during "the great war" also generated interest in hydrocarbon byproducts. These substances were made from calcium carbide and would later become the raw materials for the production of plastics, synthetic rubber, fibers, solvents, explosives, and industrial chemicals. In 1919 the first production of synthetic ethylene began. Ethylene would develop into the industry's most important industrial hydrocarbon, eventually used in polyethylene (plastics), polystyrene (styrofoam), and antifreeze, among other products. Union Carbide's Prestone brand ethylene glycol soon became the top-selling antifreeze, a position it held throughout the twentieth century.
Polyethylene, a plastic used in squeeze bottles (high-density polyethylene), as well as in films and sheeting (low-density polyethylene), became Union Carbide's largest dollar-volume product after World War II. An olefins division was set up in the 1950s to supply low-cost raw materials for the chemicals and plastics industry in the 1950s. For several years the company sold these plastics to other manufacturers. But Carbide finally capitalized on this discovery in 1964, when Glad branded plastic wraps, bags, and straws were introduced. Within just four years, Glad became the leading brand in its market.
By the 1960s, Union Carbide occupied the top spot in many of its primary fields, including industrial gases, carbon electrodes for industrial electric furnaces, batteries, atomic energy, polyethylene plastic, and ferroalloys. In 1965 the conglomerate's sales topped $2 billion for the first time. And from 1956 to 1966, Union Carbide parlayed a few plants in a dozen countries into 60 major subsidiary and associated companies with plants in 30 countries serving over 100 markets. International operations of the conglomerate contributed 29 percent of its annual sales, and mid-decade the company name was changed to Union Carbide International Co. to reflect its increased global presence.
Union Carbide was still the United States' second-largest chemical producer, but it invariably lagged behind most of its competitors in terms of growth and profitability during this period. Misguided investments in petroleum, pharmaceuticals, semi-conductors, mattresses, and undersea equipment, combined with a $1 billion petrochemicals complex at Taft, Louisiana, which ran in the red for the last three years of the 1960s, further tarnished Union Carbide's standing. Not surprisingly, the conglomerate's stock dropped from $75 in 1965 to $45 in 1968 as the company "earned a reputation for aimless fumbling," according to Business Week.
Unfortunately for Union Carbide, environmental complaints about the company's Marietta, Ohio, ferroalloy plant came to a head in 1971, when consumer champion Ralph Nader brought a decade of local residents' complaints into the national spotlight. For four years, the conglomerate had largely ignored public and government efforts to make it clean up several plants that were polluting the air over West Virginia. Union Carbide's resistance to outside influence gave it the public image of a reactionary bully concerned only with profits and scornful of the environment, a stigma that would haunt the company for years to come. In 1971, UCC capitulated to federal orders that it immediately use more expensive low-sulphur coal to reduce noxious sulfur dioxide emissions by 40 percent. The company was given a fall 1974 deadline to install $8 million in advanced emissions scrubbers.
From 1967 to 1973, physical output of chemicals and plastics rose 60 percent, while per-pound production costs were cut by one-third. William S. Sneath continued these trends when he became chairman and CEO in 1977. Still, the company found itself increasingly strapped for cash. Steadily rising expenses in Europe resulted in a $32 million loss in 1978, which forced Carbide to divest virtually all of its European petrochemicals and plastics operations. That same year, UCC was forced by its creditors to retire $292 million in long-term debt, which forced it to borrow another $300 million in 1979. That year, Carbide's Standard & Poor's credit rating fell from AA to A+, and its stock fell as low as 42 percent below its $61 book value.
Chairman Sneath embarked on another round of cost-cutting in 1980, pruning the executive staff by 1,000 and divesting a total of 39 businesses. Sneath retained six primary businesses: graphite electrodes, batteries, agricultural products, polyethylene, and industrial gases. By 1980, Carbide had 116,000 employees at over 500 plants, mines, and laboratories in 130 countries, bringing in over $9 billion in annual sales. Sneath embarked on a plan to invest profits into high-margin consumer goods and specialty chemicals.
The massive disaster at Union Carbide's pesticide plant in Bhopal, India, in December 1984 struck the corporation just as it was beginning to make lasting strides toward profitability.
UCC had established battery plants in India as early as the mid-1920s, and had seven plants with 5,000 employees there by 1967. India's chronic food shortages precipitated a government-sponsored "Green Revolution" in the 1960s, with the country's socialist government eager to join Union Carbide in establishing pesticide and fertilizer plants. In 1975 the Indian government granted Union Carbide a license to manufacture pesticides, and a plant was built on the sparsely populated outskirts of the regional capital of Bhopal. The plant drew more than 900,000 people to Bhopal by 1984.
Union Carbide officials estimated that at least five tons of methyl isocyanate (MIC) seeped out of the plant in just 30 minutes one day in December 1984. The accident killed over 2,300 people and permanently injured another 10,000. Newsweek magazine called the incident "the worst industrial accident in history."
Five senior Indian executives of Union Carbide were arrested. The Indian government charged Warren Anderson, chairman of Union Carbide's board, with "corporate and criminal liability" and accused the Union Carbide management of "cruel and wanton negligence." Many class action suits were filed against Union Carbide on behalf of the victims. In April 1988, a court in India ordered Carbide to pay $192 million in "interim" damages. Union Carbide and the Indian government reached a much-criticized settlement for $470 million in 1989.
In addition to the human toll, the tragedy set off a chain reaction at Carbide: by 1985, the company's market value dropped by two-thirds to less than $3 billion, and GAF Corp.'s Samuel Heyman accumulated enough stock to mount a hostile takeover bid of $5.3 billion. After working for two decades to expand its consumer products lines, Carbide was forced to sell off its Consumer Products Division, a profitable group that included Glad trash bags, Eveready batteries, Prestone, and STP automotive products, for $840 million. The corporation borrowed $2.8 billion, raised a total of $3.6 billion in asset sales, and repurchased $4.4 billion in stock to repulse Heyman's attack.
Carbide scaled back to the three main business lines--chemicals and plastics, industrial gases, and carbon products--that were once its strength, and benefited from sharply reduced interest rates and falling costs of petrochemical feedstocks. But the company had lost the safety net provided by its consumer products.
In 1989 Carbide advanced slightly on its long journey toward financial recovery. Net income was $573 million. Profits in the chemicals and plastics divisions put Carbide in the number two spot on the list of the top ten publicly traded companies in America. The company succeeded in reducing its debt-to-capital ratio to below 50 percent, and invested $181 million in research and development. That year, the company introduced its proprietary LIHDE Oxygen Combustion System, which used pure oxygen to burn organic wastes.
As a fitting mark to Union Carbide's 75th anniversary in 1992, the company had the year's best-performing stock on the Dow Jones list of 30 industrials. Carbide was half way to achieving its $400 million cost reduction goal, and had endured a loss of $187 million. The dramatically smaller corporation had shifted its focus from diversification to becoming a low-cost leader in basic chemicals.
This strategy included uncharacteristic environmentalism: Carbide anticipated "inevitable government mandates on waste reduction and recycling" when it started reprocessing plastic bottles in 1992. After Bhopal, UCC's efforts helped raise industry performance standards and levels worldwide, and the company was praised for its "Responsible Care" efforts.
Fast forward into the past and present:
Court Convicts Seven in Bhopal Gas Leak
A district court in Bhopal found seven former Union Carbide India Ltd. officials guilty of "causing death by negligence" in the gas leak there 25 years ago, the first verdict in the only Indian criminal case against the company related to the disaster.
The defendants were found guilty of failing to prevent the leak at a Union Carbide pesticide plant, sentenced to two years in prison and fined 100,000 rupees ($2,130), India's Central Bureau of Investigation said.
The verdicts will likely be appealed.
Victims' representatives say the gas leak, India's worst industrial disaster, killed between 8,000 and 10,000 people in the days following the accident, has resulted in the deaths of 25,000 people, and that 100,000 people continue to suffer from chronic illnesses stemming from gas exposure.
The government of Madhya Pradesh, the central Indian state where Bhopal is situated, puts the death toll at 3,787.
Union Carbide has said its officials weren't involved in the day-to-day running of the plant and therefore weren't subject to the jurisdiction of the Indian court.
"Union Carbide's responsibility—along with the rest of the chemical industry—is to work hard every day to prevent a tragedy like this from ever happening again," the company said in a statement after the verdict.
The statement added, "After 25 years, what are needed most now in Bhopal are prompt and effective government attention to claims that victims and their families are still suffering and a cleanup of the Bhopal site by the Madhya Pradesh State Government, which controls the site."
Bhopal gas leak: Each victim has got around Rs 12000 [that's a bit more than US$250]
The world's worst ever industrial disaster took place on the night of 2-3 December 1984, when a tank full of deadly methyl isocyanate gas exploded in a fertilizer plant owned by UCIL. Over 40,000 kg of the toxic, colorless gas wafted over the sleeping city. People who breathed the gas suffered symptoms ranging from suffocation, blindness and vomiting to spontaneous abortions, lung, kidney, liver and brain damage. Initially, nearly 4,000 people died and over a lakh suffered injuries. Latest estimates put number of deaths at over 20,000 and injured at nearly 6 lakh. [A lakh is roughly 100,000.]
The highly reactive gas is supposed to be kept at temperatures below 5°C, under pressure. However, the refrigeration system had been shut down since June 1984. The tank and valves that regulate gas flow were also defective. There was no safety system in place. There was no warning system for localities surrounding the factory. Lessons had not been drawn from earlier accidents in the same plant.
A BBC account of the events at Bhopal on December 3, 1984, described the situation:
Hundreds of people have died from the effects of toxic gases which leaked from a chemical factory near the central Indian city of Bhopal.Another account reported,
The accident happened in the early hours of this morning at the American-owned Union Carbide Pesticide Plant three miles (4.8 km) from Bhopal.
Mr Y P Gokhale, managing director of Union Carbide in India, said that methyl isocyanate gas (MIC) had escaped when a valve in the plant's underground storage tank broke under pressure.
This caused a deadly cloud of lethal gas to float from the factory over Bhopal, which is home to more than 900,000 people - many of whom live in slums.
Chaos and panic broke out in the city and surrounding areas as tens of thousands of people attempted to escape.
More than 20,000 people have required hospital treatment for symptoms including swollen eyes, frothing at the mouth and breathing difficulties.
Thousands of dead cats, dogs, cows and birds litter the streets and the city's mortuaries are filling up fast.
Bhopal resident, Ahmed Khan, said: "We were choking and our eyes were burning. We could barely see the road through the fog, and sirens were blaring.
"We didn't know which way to run. Everybody was very confused.
"Mothers didn't know their children had died, children didn't know their mothers had died and men didn't know their whole families had died."
The leak was caused by a series of mechanical and human errors in the pesticide producing plant, operated by the Union Carbide Corporation, a U.S.-based multinational. For a full hour, the plant's personnel and safety equipment failed to detect the massive leak, and when an alarm was finally sounded most of the harm had already been done. To make matters worse, local health officials had not been educated on the toxicity of the chemicals used at the Union Carbide plant and therefore there were no emergency procedures in place to protect Bhopal's citizens in the event of a chemical leak. If the victims had simply placed a wet towel over their face, most would have escaped serious injury.As near as Guambat could discern, no one blamed the US President for the situation.
So, to put this into perspective, in terms of real damage, the Deepwater Doodoo is a big stink, but the numbers of human deaths, particularly the "collateral damage", resulting from it pale in comparison to the Union Carbide disaster.
But otherwise, how are the similarities shaping up, if at all? It will be intriguing to see if BP goes the course of Union Carbide, or if we've now learned from past disasters.
Whatever will come of the Deepwater Doodoo, as for Bhopal, the British Broadcasting Corporation is reporting,
Rashida Bee, president of the Bhopal Gas Women's Workers group, told the AFP news agency that "justice will be done in Bhopal only if individuals and corporations responsible are punished in an exemplary manner".