CORPORATE

SOCIAL RESPONSIBILITY

BP DEEPWATER OIL SPILL REPORT

TALHA NAYAB
0320138

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Deepwater Horizon Report

Table of Contents

BP DISCUSSION ON DEEPWATER HORIZON ................................................................... 2

COMPARISON EXXON VALDEZ & DEEPWATER HORIZON .......................................... 9
RENEWABLE ENERGY AND ITS BENEFITS ....................................................................... 12
REFERENCES .............................................................................................................................. 15

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BP DISCUSSION ON DEEPWATER HORIZON

On 20th April 2010, eventually 5 million barrels of oil dispersed in to the Gulf of
Mexico causing the worst environmental disaster in United States history. This
catastrophic disaster emerges due the occurrence of series of events, comprising
technical, management and regulatory issues.

British Petroleum (BP), is one of the sixth largest oil and gas company around
the globe, (Helman, Christopher, 2013), multi-national corporation
headquartered in London. It imprints it footsteps into oil industry in early 1909,
when group of British geologist discovered large amount of oil in Iran, (Bamberg,
1994), and incorporated as Anglo-Persian Oil Company. Through that time it
evolves into vertically integrated organization operating in all areas of Oil and
Gas Industry, from exploration to refining and even distribution and marketing.
In this evolution process BP have been through hardships, project venture
failures and wrong decisions; Deep Water Horizon being the biggest set back to
companys image and performance.

The events that lead to this disaster, was not just made on Deep Water Horizon,
but it was reasons building up from changes in its organizational structure in
1980s. During that time it had a matrix structure. Since it was affecting decision-
making process, Robert Horton changed the hierarchical structured departments
into smaller teams. This radical change in the organization took time to be
adapted by the employees. After the privatization of the organization, each CEO

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efforts exhibited a tilt towards cutting cost rather safety. BP proudly states
publicly about safety over all other aspects, but the actions were different from
the words.

In 1987, BP became privatized after government selling off their shares. The
privatization changes the motive of an organization from public service to profit
maximization. All cost cutting measures was taken in order to maximize the
profit. Privatization of the organization was taken into consideration in order to
increase the productivity but it affects the profitability; making BP into huge
losses in early 1990s.

After Tony Hayward succeeded to become new CEO in mid 2007, his drive
towards transforming the culture lead to effectual decisions regarding the
operating. Tony wanted to divert the risk averse, but the transition from a small
organization into 6th largest company; required many mergers, acquisitions and
cost cutting measures. Merging with different companies incubated different
cultures, team leaders and think tanks into the organization. It created difference
of opinions and disruption in decision-making process.

The reasons mentioned and discussed earlier, led toward the biggest
environmental disaster. All these decisions seem significant but the negligence in
implementation erupted with unexpected disasters. At the point of Deep Water
Horizon all employees was deep rooted with curtailing time and money, this led
safety as a second thought. As the rig was already behind their schedule time due
to natural disaster, Hurricane Katrina and other management factors. The rig

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was costing BP $1 million a day, so some negligence towards safety arose. After
testimony of related employees, it was brought in the committees knowledge
that top management pressured to saving time and curtails cost. It showed a
reason of asymmetric information that BP didnt had any on-site accident for 7
years, which made all employees including top management to make such
decisions. The workforce did not believe that process safety is core value at BP,
regardless of committing publicly. The management failed to deliver the message
consistently and meaning worthy.

Deep Water Horizon was a multi-operated venture, so the decision-making
process was delayed. As there were multiple organizations included, just
blaming BP for the disaster is meaningless. Oilrig has different operations, which
requires different set of expertise. For every technical and critical process,
different organization was contacted. However, BP reserved the right to explore
the well and had majority of shares in the venture, so its name is upfront and at
stake. The oilrig was leased from Transocean along with the crew, having culture
apparently different from BPs. It has created difference of opinions and different
ways of tackling the issue.

To provide the cementing formula another organization was consulted, named
Halliburton. The cementing is used for securing the well from blowout; avoiding
hydrocarbons reaching the rig. They conducted series of test but were not
successful. Under-pressure, they provided the formula to BP without having a
successful test, in hope of resulting positive in near future. The acute mistake by
Halliburton led to worst environmental disaster.

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The oilrig was using digital methods to be in position. BP decided to use GPS
technique, instead of anchoring method to keep the rig in place. Under power
failure, it is impossible to accurately position the rig, as thruster will not operate.
There is high possibility of strong winds and current, in the region of Gulf of
Mexico where the rig was operating. It may sometimes get difficult for the
thruster to keep the rig in position. If the rig is offset from the well, it will affect
the riser and may be disastrous. It happened after the blowout, that the
Deepwater Horizon was out powered and it could not keep in position.

When currently operating team was preparing for temporarily abandonment,
large quantity of hydrocarbons entered the bottom of well undetected. Multiple
tests failed to disclose the breach of hydrocarbons into the well. When these
hydrocarbons reached rig floor, found ignition spark; the blowout occurred.

Regardless of technical and management factor contributing towards blowout,
the rig had many maintenance issues. And the rig had not gone off water for nine
years. It may have affected the performance and sustainability of the rig.
Nonetheless the rig used three computers to control the drilling process. The
responsible person had frequently claimed the software issues with the
computer systems. The rig was using outdated computers, which would hand in
middle of the process and the operator need to use another computer, in
situation if being used is unresponsive.
Some of the factors out burst and frequently used by media and other resources
to show the reason of the blowout; Centralizers being one of them. Centralizers

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are special brackets that help the riser to be centered. Halliburton hired to run
simulation model to suggest cementing procedure and suggest usage of
centralizers. Halliburton suggested using twenty-one centralizers due to the
length of the riser. But Deepwater Horizon operators and BPs management
neglected this decision, as they proposed to use six centralizers that they already
had onboard. This pronouncement was made to reduce the cost and saves time,
as additional centralizers would have delayed the project 10 more days. The
series of email went back and forth, but the reply from BPs decision-maker
showed a sense of negligence and irresponsible behavior.

According to study, cementing is one the significant factor of blowout in Gulf of
Mexico. Circulation of the mud before cementing the well is an industrial norm.
In this case, it was estimated that it would take about 6 12 hours to complete
the circulation, which was completed within 30 minutes. Cement bond log is
another potential factor, which records the reliability of the cement job after its
pumped into the well. It is a technical and critical measurability, Schlumberger,
worlds largest oilfield services company was hired; but BP refused to avail the
services few hours before the blowout. The refusal cost BP as a penalty, which
was way less than if the process would have carried out, so it was considered
desirable decision at that moment.

In order to stop the blowout, Blow Out Preventer (BOP) is used. It is a device
attached to the head of well, in case of emergency to cut off the riser from the rig.
The BOP should have worked automatically in that situation but due to the
power failure and back up batteries did not worked out; it failed to prevent the

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hydrocarbons reaching the top. The BOP used in the Macondo well was never
been checked for the past 10 years and the back up batteries was drained due to
wrong wiring. After the chaos and oil could not stopped coming from the well,
the BOP was used manually. According to CSB, due to high pressure within the
riser, the pipe buckled up inside the BOP. The buckling process caused off
centering of the pipe, affecting blind sheer ram inside the BOP to cut off the well
from the rig. BOP has three prevention systems within, Pipe ramps is used as a
temporary fixture, but due to high pressure and Oil and Gas was already in the
riser, and it failed.

One factor that maybe acute to consider but it may have affected post blowout
reaction of the employees. The alarms on the rig were disabled to prevent any
false alarm. If alarm system were running as usual, they would have gone off
with the high gas level before the blowout. This simple act would have safe the
lives that were lost that day.

Some of the issues discussed led to the conclusion that BP could have prevented
this environmental and economical disaster, if they would have taken the
decisions in favor of safety rather than cutting cost and saving time. BP cannot be
fully accountable for the disaster; there were other companies involved in some
of the critical decisions that were made at that point. Some of the decisions
related to this disaster; some how link to decisions we make everyday. For
instance, while you are driving and approach a yellow traffic light, its your
decision to hit the gas or brake. Either way both of the decision can be dangerous
at their state.

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The decisions made at that stage by BP or other companies, reflect their
corporate culture and practices. Some of the decisions were made under
pressure, as there were huge amount of money at stake every day. According to
business perspective, BPs decision will be considered appropriate but they were
ethically wrong; which led to this disastrous event.

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COMPARISON EXXON VALDEZ & DEEPWATER HORIZON

Exxon Valdes oil spill occurred in 1989, near natural habitat for marine life near
Alaska. Exxon Valdez, oil tanker struck by the Bligh Reef when Captain was not
incharge due to heavy drinking. The tanker was moving towards California, and
in middle of the night the incident took place and 11 million gallons of oil spilled
over into the sea; considering one of the most devastating human-caused
environmental disaster. Over the next 20 years, the industry would have learn
from this disaster to avoid in the future, but in 2010 Deepwater Horizon incident
took place. It showed that industry havent been learning from the past. Till date
Deepwater Horizon is considered to be the biggest oil spill in US waters.

In comparison, both incident affects the environment and economic deeply. An
objective view of the available data shows that there were fundamental
difference in site-specific factors. The Exxon Valdez Oil Spill (EVOS), occurred
due to oil tanker running aground on a reef near a rugged shoreline and
Deepwater Horizon (DWH) spill, occurred from a well 5000ft below the ocean
surface. The oil spilled during DWH was way more than the EVOS. Both incident
occurred due to management, technical and regualtory issues.

Both incident showed a failure of prevention system and the negligence of the
federal government. In Alaska commission noticed that the entire organization is
build-up with primary focus on production rather than safety. The official state
and regulatory bodies granted the permission based upon industrial data and

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assurances on the design and safety elements. The permits was issued to Exxon
without required documentation, without strict compliance with industry and
federal rules. The rules were bended in favour of the organization with immense
resources and political momentum, (Zygmunt, 2010). DWH also exhibits same
complacency and inapproriate collusion; the regulators and regulatees worked
together as a single community. The lease was granted oversighting the depth of
the well and with lenient requirements for drilling. BP not even disclosed the
geological data, in the name of corporate policy.

Both of the disaster were decades apart, but reveal same systematic failure. In
both cases the contingency plan were highly fictious. There were no
demonstarted technology to capture a such blowout, at the Macondo well. In
Alaska, the Exxon initial plan failed to capture the oil and the generic corporte
plan was executed. It showed the negligence and unpreparedness in respective
cases by both companies.

Government planning and response to the incident seems identical in 1989 and
2010. In 1989 government had limited expertise to supervise a massive oil spill
in a remotely and environmentally sensitive location. Lack of expertise led
towards affecting the environment; which seems identical in DWH case. This
time government had little expertise to stop the oil discharging from the sea
floor and million of gallons disperesed into the Gulf of Mexico. Both incidents
affects the environment badly, but EVOS did recordidly more, (according to US
Fish and Wildlife Service).

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The Exxon Valdez grounding and oil spill occurred due to human error,
mismanagement and perhaps an overconfidence in vessel auto navigation.
Human error occurred to Captians irresponsible behaviour and failure to
provide navigation watch to third mate. The third mate failed to maneuver the
vessel due to stress and high work load. The Deepwater Horizon explosion and
sea floor oil discharge represented a high risk engineering decision and
management flaws. BP portrays poor safety culture, which curtained up due to
incidents investigation. BP was also overconfident in BOP used at extreme depth
and under unanticipated extreme situations.

There were less promising dissimilarities as well, however. In the 20 years since
Exxon Valdez, the technology of media spin control has grown exponentially in
sophistication, the political setting has drifted farther from concern with science
and fact as congressional polarization has increased. Both cases demonstrates
the interdependencies among regulatory bodies as they conducted response
operation. Both cases showed high complexity in managing response operations
and critical situations. Furthermore, both incidents demonstrated the interaction
between lapses in human judgement ans massive consequences from the
breakdown of large scale technical systems. Evidently, both companies at the
time of incident was operating to increase productivity as a primary motive
rather than safety. Convincingly the safety measures and issues were
compromised in order to curtail cost and save time, as both companies at the
time of the unethical event behind their schedule.

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RENEWABLE ENERGY AND ITS BENEFITS

Renewable energy uses energy sources that are continually replenish by nature;
sun, wind, water, earths heat and plants. Renewable energy technologies
transform these energies into usable form oftenly electricity but also heat,
chemicals, or mechanical power, (National Renewable Energy Laboratory).
Primarily fossil fuels are used to power our houses, offices and cars. But these
resources are finite and have much more safety and disposal concerns. Currently
we are using fossil fuel energies more than they are produced; alternate
solutions need to be considered rather than continously rely on fossil fuel.

Hydro-power is one of the oldest and largest renewable power sources,
(Worldwatch Institute, 2012). Hydro power plant converts the energy of flowing
water into electricity. This is primarily done by building dams within river and
releasign water through turbines to produce electricity. Hydropower production
release no emission into the atmosphere but can create ecological problem,(DOE,
2001).

Solar energy comes directly from the power of sun and is used to produce
electricity, heat and light. Solar power can be produced either by power plants
using suns heat and by photovoltaic technology, which converts sunlight directly
to electricity using solar cells, (Department of Energy, 2011). In 2011,
International Energy Agency reported that the development of affordable,
inexhaustible and clean solar energy will create long term benefits. It will helps

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to enhance sustainability, reduces pollution and lower the cost of mitigating
climate change, (IEA, 2011).

Wind Power is produced by the energy of wind turning aerodynamic blades
mounted on a hub. The hub is connected to a shaft that turns generator, which
helps to produce electricity.

Renewable energy production helps to stabilizes the economy. The most of the
investment are spent on materials and workmanship to build and maintain
facilities, rather than on costly fossil fuel imports. These investments helps to
create more jobs and strengthen the local economy. Renewable energy
companies contribute more local tax revenue than fossil fuel energy companies.

In strong wind areas, farmer and other land owners can lease their land to wind
or solar energy developer. It will help the farmer to produce energy for their
farming use and earn more money for better standard of living, (Burton,-). A
small wind turbine uses less space but can produce sufficient energy for farming
and personal use. This can be helpful in reducing farmers operating cost and in
areas where state governed electrical lines are not available.

Renewable energy generation helps to reduce the negative effect on the
environment. It does not produce carbon dioxide or other chemical pollutants.
The positivity of using the renewable energy is easily visible as of fossil fuel
usage. Usage of renewable energies can also helps to avoid the environmental
and economical disaster like, Exxon Valdez or Deepwater Horizon Oil Spill.

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Renewable energy sources can have its own drawbacks. One of the negativity is
that it is not able to produce large quantities of electricity that is possible by
traditional fossil fuel generation. Another drawback is to rely on natural
resources availabilty. Some time due to bad weather conditions, it may not be
possible to produce solar, wind or hydro power. This means to create a balance
in to energy usage and to avoid deprevation of energy from our lives, we need a
combination of traditional fossil fuel and conservative renewable energy
generation.

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REFERENCES

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"Energy Sources: Solar". Department of Energy. Retrieved 19 April 2011.

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"Oil majors' output growth hinges on strategy shift". Reuters. 1 August

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"PFC Energy 50". PFC Energy. 2013. Retrieved 6 June 2013.

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Alyson Flournoy, Sidney Shapiro, William Andreen, and Thomas McGarity.

(2011). The BP Catastrophe: When Hobbled Law and Hollow Regulation
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Chris Burton. (-). Advantages and Disadvantages of Renewable Energy.

Available:
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Christina Ingersoll, Richard M. Locke, Cate Reavis. (2010). BP and the

Deepwater Horizon Disaster of 2010. MIT Sloan Management. 110 (10),
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Deepwater Horizon Study Group. (2011). Final Report on the

Investigation of the Macondo Well Blowout. p6-10.

Exxon Valdez Oil Spill Trustee Council, Oil Spill Facts: Questions and
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Largest of Its Kind, Scientists Say". The New York Times. Retrieved 17
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Skinner, Samuel K; Reilly, William K. (May 1989). The Exxon Valdez Oil
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Stanford University Lecture. (2010). The Deepwater Horizon Accident:

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U.S. Fish and Wildlife Service, Deepwater Horizon Bird Impact Data from
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Wethe, David (January 20, 2012). "Schlumberger Fourth-Quarter Profit

Rises as Drilling Booms". Bloomberg News.

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Hydropower Increases"

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