The Spill - British Petroleum Case

Christian Mercado

Dr. Seng

MGT 585

13 October 2016

                                The Spill: Case 3

British Petroleum, most commonly referred to as BP, was started in 1908 by William D’Arcy, and with a long journey filled with struggles to success, became the 6th largest oil and gas company in the world. In the PBS feature The Spill, Frontline and ProPublica began a joint investigation on the numerous accidents and spills BP had encountered in a 10-year period. The majority of safety issues and spills coincidentally occurred under John Browne, former CEO of BP.  BP’s issues seemed to arise after Browne purchased Amoco, Arco, and Burmah Castrol. Although BP appeared to be successful for the time being, the company was in for a giant surprise. The issues stemmed from John Browne’s fixation on becoming the world’s largest oil and gas company. He was determined, regardless of the methods he used to obtain that title.

The first issue that surfaced within BP took place in March 2005, in Texas City, which was one of BP’s largest oil refineries. On that day, 15 workers were killed and more than 170 were injured in the explosion. Prior to the explosion, senior management was aware of the faulty conditions of the equipment and the refinery overall. In order to cut down on costs, major safety upgrades were ignored or postponed in the Texas City refinery that was built in 1934. Workers and contractors felt weary about their safety, and rightfully so. According to safety consultant Mike Sawyer, the Texas City refinery had a fire every single week. After the decision was made to save 150 thousand dollars in lieu of the necessary upgrades for the refinery, BP culture changed completely. This was the start of many decisions from British Petroleum that displayed how money and power took precedence over safety, the environment, and human life.  

The explosion at Texas City was only one of many dilemmas BP faced. The next controversial spill occurred at BP’s Prudhoe Bay location. The equipment at Prudhoe Bay had a life expectancy of twenty years, but with knowledge of having so much more oil to drill and money to make, cutting costs was continuously implemented and expert advice was ignored. Even after a contractor had been injured, BP paid the employee to keep silent, and this was the trend with many other workers tangled up in similar situations. Soon after workers’ injuries, letters were sent to corporate headquarters in England, but were ignored, and no issues were resolved. In March 2006, a major oil leak occurred from the Alaskan pipeline and was considered one of the largest spills in that region. Pigging, a type of cleaning practice, was ignored to cut costs and was the reason the Alaskan pipelines failed. This spill put BP back in the spotlight and had media buzzing about their continuously ignored safety concerns. This wasn’t the last of BP’s deadly accidents and disastrous spills. Offshore drilling was the oil industries’ newest exploration, and BP was first to volunteer. BP had invested millions of dollars on 100 wells in the Gulf, and with little liability and supervision, BP became complacent with their safety standards. As predicted, BP made the headlines for the latest oil explosion and disaster, leaving 11 workers dead and 17 more wounded. Cutting costs had repeatedly been the reason the deep sea operation and so many others before this has failed. BP was already ten million dollars over budget on its newest operation and workers even labeled the project, “The Well from Hell.” Many corners were cut and documented proof was found where engineers discovered ways to save millions of dollars and manipulate the projects, regardless of safety concerns. Soon after this disaster, John Browne was finally replaced, and Bob Dudley took over as CEO.  

BP’s ethical culture can be assessed in many ways, but would most likely be presented in a negative light. This is due to BP’s lack of attention to environmental pollution, unsafe working conditions, and ignored advice to upgrade facilities and equipment. After the first incident at Texas City, BP’s message became clear, to cut costs, do what they can with what they have, and continue to make more money to please shareholders. BP continuously put profits ahead of the environment, which further defines their ethical culture very well. Unfortunately, all across the company, workers were aware that profits came before them. According to Dr. David Ohreen, Assistant Professor at the Bissett School of Business, “In fact, BP’s failure to stop the worst oil spill in U.S. history is indicative of a much larger problem with companies that have embraced one of the central ideas in management today: stakeholder theory. What is lacking is the ethical content within BP’s strategic environmental management system. Stakeholder theory would correctly identify the environment as a stakeholder but it provides no guidance regarding the ethics of how or what we ought to do in order to protect the environment. ( Ohreen 6) BP should have accounted for the interest of everyone’s safety and the damage that their old equipment would have brought. BP faced an ethical dilemma, that seemed like an easy decision to make. While BP had the interest of employees and the environment in mind, interests of stakeholders took hold of CEO’s like John Browne and Tony Hayward. BP’s culture had been corrupt for almost a decade, failing to create a culture of safety in such a risk-induced industry, until Bob Dudley took over and began the slow and tedious changes the company had been longing for after a mound of problems, and a history of disasters.

In order to prevent spills, the Government should oversee gas and oil companies directly, conduct frequent spot inspections, and hand out fines for companies ignoring safety standards. The government should take the perspective of environmentalists and lawmakers as opposed to greedy stakeholders. According to Energy Tomorrow, “After the Gulf oil spill, the industry has taken several steps to improve safety mechanisms. Under federal law, all companies with offshore facilities must file oil spill contingency plans with The Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) and emergency response plans with the U.S. Coast Guard. Companies must ensure that spill response equipment is available and properly maintained, and that employees are adequately trained. Federal and state agencies regularly conduct drills and inspections to ensure response capabilities are maintained at a high level. Following the Gulf oil spill, the industry has taken several steps to improve our safety mechanisms, including joining forces to build and deploy a rapid-response containment system. This system is pre-engineered, constructed, tested and ready for rapid deployment in the deep water Gulf of Mexico. Its primary objective is to contain spilled oil with no flow to the sea” (Energy tomorrow 2). Business Educators should be teaching and analyzing companies like BP and the mistakes they made in order to steer major oil companies in the right direction. I believe business educators and the government should enforce that all senior leaders take a class at the Center for Offshore Safety, a few times a year to learn about and keep current with the challenges of offshore oil and spill prevention. If everyone from the CEO down to the blue-collar worker shared open communication, the gas and oil company can become more attuned to the ways they can enhance worker safety and spill prevention.