Table of Contents
Here is an introduction
Current Challenges in BP
Creative Problem Solving Techniques and Strategies
The ability to guide and direct a group of people
Corporate Governance & CSR
Afficient and effective control
Corporate Social Responsibilities (CSR),
This is an introduction to the topic.
Deepwater Horizon (2016) is a Peter Berg film. Based on the Gulf of Mexico Deepwater Horizon Oil Rig Explosion of April 20, 2010, 11 of 126 people were killed. The explosion was the worst in US history, with 210 million gallons of oil (estimation), erupting into the sea over 87 days. Transocean, a privately owned offshore oil drilling company, had begun drilling off Louisiana’s Southern Coast. Mark Wahlberg (the Chief Electrics Technician) was responsible for controlling the rig’s electrical and computers. The film portrays exact events. He was the last worker to leave the rig. James “Mr Jimmy” Harrell is also in the film. He is the Offshore Install Manager. Caleb Holloway is part of the drilling crew. Andrea Fleytas is Gina Rodriguez and the Dynamic Position Operator. BP managers Donald Vidrine and Robert Kaluza are Brad Leland. The film details the events that led to the rig’s explosion and rescue efforts of its employees. Below is research that details the events and causes of these incidents. Many of them can be attributed to poor or inadequate management skills and corporate governance. This project will analyze the business’s failures and identify reasons. BP also receives strategies to help plan for the future.
Current Challenges to BPThe Deepwater Horizon exploded an estimated 210million gallons of oil in the Gulf of Mexico. This was the worst accidental ocean spillage in human history, according Smithsonian. The oil plume lasted 22 miles and allowed oil to mix with the seawater, settling just below the surface. 20% of oil spilled onto the seafloor and on top of it. Deep sea corals were damaged and other ecosystems that are still recovering from the oil spillage remain unaffected by it. According to biologicaldiversity.org, BP is responsible for the harming/killing of 82 000 birds, 6 165 sea turtles and 25 900 marine mammals.When the facts about how the oil spill started reached the public BP faced a bad image being created. Customers were reluctant to trust a company that didn’t take safety precautions for employees, and who caused such great damage to the marine and environment life. Experian Simmons DataStream’s statistics prove this: BP lost a large number of American clients. In nine weeks, the percentage of customers lost fell from 26.4% in April to 16.4% in June 2010. This is 38% less than their average customer base. BP lost 56% of its loyal customers during this time. BP has to regain lost customers. BP suffered a $6.26 billion loss due to customers.
BP was forced to pay $61 million in damages. This amount is twice as large as the market capitalizations for the next two largest U.S.-based oil companies, ConocoPhillips Occidental Petroleum. Various parties received damages costs, including hundreds, 400 local governments, thousands, Transocean, the Environmental Protection Agency, (EPA) for Clean Water Act penalty and natural resources damages. The EPA payment covers all costs associated with medical and cleanup, as well as economic losses. Fadel Gheit from Oppenheimer & Co said that BP was worth $180 billion prior to the accident. One-third of BP’s market capitalization was lost due to the accident. It’s incredible that the company remains in business.
BP initially tried to challenge the Supreme Court’s decision to settle claimants, but it was rejected. This creates uncertainty for BP about the amount they need to pay, beyond a $18.7billion settlement. Five years later, half the parties to BP’s monetary claims haven’t received payment. This means that BP could face legal action and be required to pay more than the amount originally agreed upon.
After the spillage of the oil, BP’s stock plummeted by 51% in just forty days. It dropped from $60.57 to $29.20 billion. They had to dispose of close to $22 billion and sell assets worth $30 billion. Their company’s value decreased and so did share prices. Since the 20th April 2010 oil spillage, BP has lost $105 billion.
The Delphi Technique is a creative thinking and problem solving technique that can be used to solve the Gulf of Mexico oil spillage issue which has caused the death of thousands of marine mammals. BP could organize an international forum to get experts to give their input and advise on the best way to clean up oil. BP could act as facilitator and create a questionnaire to gather lots of information. BP can use this strategy to review each completed questionnaire. After all options have been considered, a decision is made on the best path forward. BP might place barriers in the ocean that trap oil, making it easier for it to be cleaned up.
The negative image that BP created was a danger. They could lose a lot of their clients, which would result in a loss. This was exactly what happened. They lost 38% and suffered a loss totaling $6.26 billion. BP could use the SWOT analysis strategy to identify external threats. BP can use the strategy of performing an external SWOT analysis to identify potential threats and create new opportunities. Reporters must be brought on board to report on the clean-up initiative. BP can show the world that they care about the environment by promoting this advertisement. This strategy is crucial for BP in order to identify the problems and fix them.
BP was required to pay $61 Billion in damages. They should now seek to recover the money they have paid and rebuild the company’s value for shareholders and customers. The Decision Tree strategy is a way to encourage rational decision-making and clarify the options available and their consequences. A process can be used to calculate each option and then determine the likelihood of success. This will allow BP to make a decision about how to address this issue. This will increase their customer base and result in increased sales. The Decision Tree will contain decisions about how to improve their image. Each option is considered and discussed. BP needs to have options that will improve their image.
BP may be sued and have to pay more money due to the fact that they did not pay claimants. BP needs to create a Pros and Cons Chart in order to determine if paying claimants is a long-term strategy. BP has two cons. They could be sued and have to pay more than they had planned. Additional cons they could add are that customers won’t support businesses that don’t care about the victims of the spillage. They would save money on the amount that would have been spent. This strategy is critical for BP. It will enable them to clearly understand the consequences of their decision and better analyze it. The chart’s cons will make BP realize that the decision to not pay claimants in their initial settlement was a poor one. They can then come up with a strategy for overcoming this problem. This could include apologizing and gaining back trust from the affected parties. They can increase their sales by making their initiative known to the public. This will help them regain some lost clients.
BP’s share price fell and the company’s shares prices declined. To help with this problem, a Value Chain Analysis could be useful. BP must be careful with how and where they spend their money after the spillage. This strategy allows them to determine where there is value in their overall business operations. This will allow them to cut costs and stop spending on activities that aren’t creating value. You can begin by analysing each sector’s activity and determining where value is/isn’t created.
Management CompetenciesJudgement/Decision MakingThere is mud in the pipe drilled into the seabed to pump up oil. This mud can be called “cement” because it prevents gases and flammable liquids from escaping and exploding onto a rig. Vidrine and Kaluza, BP managers, sent the Schlumberger team away. They were supposed to test the mud for strength and allow drilling to begin (cement log test). This decision was made after BP was overdue by 43 days and $50M in budget. BP decided to skip the test in order to reduce expenses and avoid losing money. Although they are supposed be risk-oriented companies, BP sacrificed the test that would have ensured safety for their employees prior to performing hazardous work. Schlumberger could have stopped the explosion by having run the test. Vidrine & Kaluza should have evaluated what was happening before they took action. Instead of acting with integrity, they acted out selfishly. They were unable to pass the test because they thought it was stupid and would have put their safety at risk.
The two failed tests on the drill pipe caused a problem on the rig that could not be explained. It was showing high pressure but no mud was coming out of the pipe onto the machine. Normaly, if there’s high pressure, that means there’s a leak. The drill pipe will then rise with mud. Vidrine was able to assume the role of leader and explain what he felt was wrong and how to proceed. Vidrine came up with a solution. He did another test, but this time on the killline and not the drillpipe. It is a sign that the drill pipe’s sensor was not working correctly. Vidrine stated that this was the best solution because no one else had any and that he initiated it anyways, even though not everyone was on board. As a leader, he needs to ensure everything runs smoothly. Accepting that the mud could not leak through would have meant additional expenses to return the Schlumberger team, stop drilling operations and conduct the cement bond log testing. Because BP was running behind schedule and exceeding budget, he attributed the problem to his employees. This demoralized them.
Analysis In case of emergency, there was no safety procedure test. Vidrine Kaluza ought to have documented all system checks. This would have allowed them to see how problems could have developed and lead to solutions. They would have created alternate plans and practiced the safety procedures in an emergency to prevent any problems. The aftermath of an explosion is where all this comes into play. After the mud had exploded, three things happened: Caleb Holloway demanded engineers to do something. Holloway told an employee to stay by the EDS (also referred to as the AMF Deadman Software) to make the pipe shorter if needed. Holloway helped an employee get to safety and then told them to take to the boats. Vidrine and Kaluza would have made sure that employees were trained in emergency procedures.
Teamwork Jimmy Harrell from BP and his managers didn’t work together. Each party had a different opinion about the situation. BP managers didn’t listen to Harrell and his point about safety for employees. BP defended their position by saying they trust the integrity and quality of the cement job. Although each party may have different goals, they should work together towards the same goal. The disagreements were not constructive and led to Harrell accusing them of being wrong and Harrell defending Harrell. Jimmy, trying to ensure the safety of the workers, forced them to come up with a solution. Managers and Harrell disagree. Harrell cares about the rig and its crew. Managers don’t care about the company’s financial health, but they do try to increase it.
Corporate Governance & CSREthics Harrell confronts BP managers Vidrine and Kaluza about their unethical behavior in sending the Schlumberger crew out without performing a cement bonds log test to see if there is a problem. It would cause additional delays and incur additional costs. Mineral Management Service (MMS), though it is allowed, did not perform this test and was therefore unethical. Managers should ensure that their employees work in safe environments. This is something they have to do. Harrell is insisting on the compliance of ethical standards by making the managers do a negative pressure test in order to ascertain the cement’s integrity. This important step is necessary to certify the safety and well-being of their employees. Safety was not considered and risk analysis wasn’t done thoroughly, which would have helped prepare the employees in an emergency.
In the Negative Pressure test scene, confusion arises when the workers are unable to explain why the pressure in the pipe is high yet no mud is escaping. The lack of transparency was the reason. Because the Schlumberger workers were sent away by BP managers, they didn’t have any information about the pipe or its quality. The employees would have been able to plan and execute their next steps if they had had this information. Vidrine’s insistence resulted in production being stopped while the employees were left in uncertainty. The BP managers ought to have made sure that the cement bonds log testing was done in order for them to be able trust the integrity and make better decisions.
Adequate, effective control The one is helping the other with his jacket. The lack of emergency evacuation protocols in place meant that BP managers didn’t have effective and adequate control. This is the result. The employees were unsure what to do when they got into shock. Managers should have made sure that employees had the skills and knowledge necessary to create a safety culture. Managers should have ensured that a safety committee was established in the event of an emergency. There was no oversight over training, which resulted in no knowledge about how to evacuate this rig. According to the National Commission, senior management failed to exercise control over the response, prevention and recovery of the blast. Instead of BP establishing a safety culture, the company adopted a culture whereby risk assessments were abandoned and instead promoted complacency.
IndependenceWhen there is an explosion on a drilling rig, there is one last procedure that will shut down the pipe. This happens when there is no hydraulic pressure or electric power. This is known as the AMF Deadman System (or the EDS in movie). It cuts the drillpipe to prevent oil and gas rising. Andrea Fleytas, who was in the control area at the time of the explosion, was about to push the EDS button which would disconnect the oil pipe from the rig. She is an independent worker who possesses the necessary qualities to be successful in her job. She was willing and able to take control and make the correct choice that would have stopped the gases from reaching the surface. It didn’t work because of the battery drain and incorrect wiring.
Corporate Social Responsibilty (CSR) Vidrine, a BP employee, admits that the goal of their company is to increase its profit by eliminating costs such as the cement bond log cost. They did not follow ethical guidelines in achieving CSR. They wanted shareholders to be satisfied by increasing BP’s price. They made a lot of cuts, which could have dangerous consequences for the safety of their workers.
Analyzing the events that led to the oil explosion and spillage can show that BP’s management team did not possess the right management skills and corporate governance characteristics. These attributes are critical for managers in order to manage the business efficiently and effectively. BP is responsible for the Deepwater Horizon oil leakage. This was due to poor management practices and poor teamwork. Their management team failed to set BP the right goal and this has caused severe problems for BP. Strategies were developed and problem-solving strategies created to overcome the obstacles. This movie is pertinent to Grade 12 Business Studies, as it gives us a close-up look at the oil industry. It is also linked to our syllabus theme of petrol station. It is clear to see the negative consequences of not being a leader/manager or engaging in unethical behavior. Students need to learn this lesson as they can see the consequences of poor decision-making. Vidrine (the film’s main character) and Kaluza (the movie’s supporting characters) embody characteristics taught in Business Studies: Management & Corporate Governance.