Pizzas galore!

The findings had potentially catastrophic implications for the project. Consultants estimate that it could cost £500m to dig up the pipeline and recoat the joints with a new material. This has not been done.

Rival suppliers have also claimed there were irregularities in the way BP awarded the £5m contract to supply the paint. Two other companies that competed for the coating contract have claimed the selection contest was rigged.

The tender was controlled by Trevor Osborne, BP’s materials consultant. The Sunday Times has learnt that Osborne’s own consulting firm, Deepwater Corrosion Services (DCS), was the UK representative of SPC at the time of the selection process. One of Osborne’s DCS directors has since joined the Canadian company. Osborne referred all questions to BP last week.

The oil giant carried out a confidential inquiry into procurement fraud allegations in November 2002, which apparently exonerated SPC and BP staff. The company refuses to publish its findings.

It appears, though, that such concerns failed to surface when BP was negotiating with the British government to secure a £56m export credit guarantee loan to underwrite the project. The credit guarantee was crucial — along with the backing of the World Bank and the European Bank for Reconstruction and Development — in persuading the commercial banks to lend £1.3 billion, the lion’s share of the project’s total cost.

Under the BP-led consortium’s agreement with those putting up the money, it was obliged to disclose any event that could have a “material adverse effect” on the pipeline.

But a spokeswoman for the Export Credits Guarantee Department (ECGD) last night confirmed BP had not informed it of any significant problems. In fact, the ECGD had only been informed of minor welding problems in June 2003, she said.

On December 17 last year Mike O’Brien, the trade minister, told MPs his decision to pledge £56m to the project had been made after a “rigorous assessment of the risks and a thorough review of the environmental, social and human rights impacts”.

Today’s revelations raise serious questions about how rigorous the government’s assessment of the project was. MPs on two Commons committees are now demanding to know whether ministers misled parliament and whether they, in turn, had been misled by BP.

The Conservative MP John Horam, a member of the house environmental audit committee, said the ECGD had failed to monitor the project properly and should consider withdrawing its loan.

“If this is a dangerous project because of the possibility of leakage, ECGD should exercise some leverage on the situation,” he said.

Yesterday, BP denied the company had acted improperly. It said the pipeline was being produced to the “highest” industry standards.

“The BTC consortium is confident that its construction techniques and testing regimes ensure that the pipeline will be laid safely and that it will operate safely,” a spokesman said.

“BTC is aware that certain allegations have been made and these allegations have been thoroughly investigated. Full discussions on this have been held with the financial institutions and other interested parties, where appropriate.”

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