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How BP handled the oil spill

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Case Summary
The paper deals with BP plc, which is a reputed oil and gas company based in the UK operating over 80 countries. In April 2010, the companys one of the oil rigs in the Gulf of Mexico exploded and is considered to be the worst oil spill accident in the world history killing over 11 workers and affecting the environment severely. The company officials faced huge financial losses and could not handle the gushing of oil in the Gulf for several months. They tried to handle the situation through public relation but their comments sparked stark criticism worldwide. In pointed out their lack of contingency plan and effective security measures.

Introduction
BP Plc (British Petroleum) is a renowned oil and gas company based in London, United Kingdom which was set up in 1909. With its revenue of $308.9 billion in 2010, it is ranked as the fourth largest energy company in the world and one of the six oil and gas Supermajors (BP p.l.c., 2011). The company is vertically integrated and is operational in every field of oil and gas industry which comprises of exploration and production, refining, distribution and marketing, petrochemicals, generation of power, and trading with its other major activities being generation of renewable energy including biofuels, hydrogen, solar and wind. On April, 2010 the Deepwater Horizon operation which was owned by BP plc had a critical malfunction and a calamitous oil spill occurred in the Gulf of Mexico. However, it was difficult to blame one identity for such an oil spill as although it was owned by BP, the platform was leased from Transocean and Halliburton was responsible for the actual drill. Moreover, the major Government agency MMS- Minerals Management Service which is a

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division of the Interior Department was responsible for government safety regulation in case of drilling of the Outer Continental Shelf (Brown, 2010).

Problem
In 2010, the Gulf of Mexico had to face a major consequence of the severe malfunction of the oil rig Deepwater Horizon. It killed around eleven workers and million gallons of oil drenched in the from the Macondo well to the Gulf with around 5000 barrels of oil gushing into the water every day from the disaster site, also contaminating the sea beaches to a high extent (Robertson & Lipton, 2010). The oil spilled in the Gulf water affected the ecological system highly by threatening marshes, wildlife and commercial fishing operations in the United States.

Technical Context
The manual and emergency blowout preventers of the oil rig both failed to perform when the worst consequence became a reality in the United States in the month of April. An oil rig blowout generally occurs when the mixture of mud, oil, natural gas and water explodes from the well, rushes up the drill pipe and kindle at the surface and bursting into flames. As per the report of Associated Press the BOPs or the blowout preventers are ill-famed due to the rates of failure in the past. They have stated that since the Federal regulators have undermined the testing specification, the cutoff valves have been breaking down repeatedly in other wells over the years. Over the past 5 years, the oil rig malfunction figures amounted to 14 which were contributed by faulty blowout preventer (Brown, 2010). The part or the instrument used in the oil rigs is around 640000 pound plate made of steel which is fixed on top of the well mouth utilizing up to 1 million pounds of force to block violent disruptions. But it is deemed that if the explosive pressure pushes more from beneath

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it often finds its way out (Brown, 2010). It is often found that there exist problems with drilling the underwater wells therefore; it was not an easy job to decide who was to be blamed for the oil spill. BP plc has been previously charged of many oil spills in their countries of operation and has been facing hindrance in their activities in the US with major breakdowns. This outlines the lack of awareness and planning of the sustainable outlays of the refineries and supervision of the technicalities in the oil rigs mentioned above.

Financial Context

The company BP plc was not stable in their financial ground having faced with several breakdowns in their operations in the United States which has often resulted in investigation being undertaken by the state and the Federal government and significant financial losses incurred. The world has observed many oil spills which has taken place in the companys oil rigs. In this financial turmoil of British Petroleum, the disastrous oil spill in the Macondo Well has led to severe financial losses to the company along with the impact on their reputation (Empowered News, 2010). The ex-chief of BP plc has admitted about the classic financial crisis prevailing in the company. The former chief of the company Tony Hayward said that this disastrous oil spill has led creditors to disappear and hence, they could not borrow funds from the capital markets both short or medium term debts at all.

Corporate Governance Context

The companys corporate governance is not considered to be adequate with its faulty management practices, supervision and control; and health and safety of the workers in the workplace. There has been an oil spill issue in the company in the year 2005 exploding

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around BPs 475000 barrels per day in their refinery in the Texas City in the US which killed approximately 15 workers and left 180 workers injured. Succeeding investigations were carried out in the refineries of the company which revealed that the cost-cutting practices in the company resulted in elimination of safety equipments and essential security practices at the refinery (Buncombe, 2007). In the urge of cost reduction in their operations, the company gave up crucial safety measures and practices which impacts the life of both human and animals, creates high environmental impacts and hinders the economic growth of the company as well as the area by incurring large financial losses. The company has also been charged of discharging of oil in the U.S waters and contaminating the marine life by the Federal Government. This has pointed out the requirement of proper corporate governance in the company by planning management practices and strategies for handling the health and safety issues of the human resources.

Solution
The company, BP plc resorted to public relations in handling the worst oil-spill that has ever taken place in the United States. As the case involved various stakeholders in it such as Transocean from whom BP leased the Maconda well, Halliburton who was responsible for the drilling activity and MMS- Minerals Management Services who as a part of the Interior Department was responsible for government safety regulation in case of drilling of the Outer Continental Shelf, started blaming each other for the disastrous oil spill. This has blown off the company image to a high extent. The ex-chief Tony Hayward told in an interview in the BBC that the company did not have any contingency plan for dealing with such a disaster of high magnitude. He could not handle the criticism raised by the media when he commented that the company was not prepared to

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undergo the pressure of the media investigating on the reasons for such accident and left the company (Empowered News, 2010). A new chief Bob Dudley was appointed to replace him. The company has been unable to stop the spewing of crude oil in the Gulf of Mexico from the underwater well which has reduced BPs credibility highly. In May 2010, the former chief in an interview with the reputed print media in the United Kingdom The Guardian made some comments which were technically correct to certain extent but it pointed out their ignorance towards the environmental damage issue (Webb, 2010). He commented that the spewing of oil in the Gulf was much less compared to the large volume of the ocean. But after the oil rig explosion many expert drillers and oil companies are of the view that BP has improved their approach in their designs and the action strategies. They have testified about the company when a special presidential commission was created to investigate the disaster.

Evaluation and Conclusion

The British Petroleum plc was required to effectively handle the above mentioned oil spill in the Deepwater Horizon for both maintaining its organizational efficiency and the ecological balance in the Gulf of Mexico. But it has been observed that the response of the company to the historic oil spill in the US has been inadequate (Dlouhy & Hatcher, 2010). Blaming each other by the stakeholders of the oil rig illustrated their lack of communication and the gap in supervision of the technical aspects of it. The response of the company has been criticized by the media and the government greatly and has been commented as clumsy (Webb, 2010). BP in their permit plan for drilling the Deepwater Horizon in the Gulf of Mexico filed with the US Minerals Management Services in 2008 had stated that they were prepared to handle the oil spill more than ten times the magnitude of the this one but when the worst-case scenario aroused they could not prohibit

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the spewing of crude oil in the Gulf harming the marine life as well as contaminating the beaches (Fitzgerald, 2010). The company has to improve their technical designs and efficiency of their equipments further in order to avoid such mishaps in future. The company should focus on human resources management in every functional dimension of their operations and must not resort to cost-cutting measures at the cost of health and safety of their workers as well as the environmental damage.

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Bibliography
BP p.l.c. (2011). About BP: BP Global. Retrieved July 26, 2011, from BP Global Web site: http://www.bp.com/sectionbodycopy.do?categoryId=2&contentId=7065607 Brown, A. (2010, June 1). The BP Oil Spill:What Happened and Who's to blame:LuxEcoLiving. Retrieved July 26, 2011, from LuxEcoLiving Web site: http://www.luxecoliving.com/lifestyle/the-bp-oil-spill-what-happened-andwho%E2%80%99s-to-blame/ Buncombe, A. (2007, May 17). BP's oil spill in Alaska blamed on cost-cutting: Independent.co.uk. Retrieved July 27, 2011, from Independent.co.uk Web site: http://www.independent.co.uk/news/world/americas/bps-oil-spill-in-alaska-blamed-oncostcutting-449167.html Dlouhy, J., & Hatcher, M. (2010). BP's response to oil spill called inadequate. US: Hearst Newspaper. Empowered News. (2010). BP ex-chief admits company was ill-prepared to handle oil spill: Empowered News. Retrieved July 26, 2011, from Empowered News Web site: http://empowerednews.net/bp-ex-chief-admits-company-was-ill-prepared-to-handle-oilspill/183629/ Fitzgerald, A. (2010, May 31). BP Had Prepared for Oil Spill 10 Times Gulf Disaster, Permit Plans Say: Bloomberg. Retrieved July 27, 2011, from Bloomberg Web site: http://www.bloomberg.com/news/2010-05-31/bp-told-u-s-it-could-handle-oil-spill-10-timeslarger-than-gulf-disaster.html Robertson, C., & Lipton, E. (2010). BP Is Criticized Over Oil Spill, but U.S. Missed Chances to Act. USA: The New York Times. Webb, T. (2010, June 1). BP's clumsy response to oil spill threatens to make a bad situation worse: Guardian.co.uk . Retrieved July 26, 2011, from Guardian.co.uk Web site : http://www.guardian.co.uk/business/2010/jun/01/bp-response-oil-spill-tony-hayward