Sunday, April 17, 2011

A Tale of BP Oil Spill in the Gulf of Mexico: One year after?

Keywords and Terms: British Petroleum; Oil Spill; Board and Management; Workplace Safety; Macondo well; Deepwater Horizon Rig; A Call For Action; Executive Compensation; Transparency; and Safety Improvement

During the long oil spill from the Macondo well last year, people had it in their minds that they were in a dream, or so it seemed. The picture of dead marine life, oil soaked birds’ feathers, polluted beaches and contaminated white sands and marshes in the Gulf of Mexico was just too much for many, they all wanted it to end, now. With British Petroleum oil executives asserting they had the Deepwater Horizon disaster under control, the public felt a sense of inconvenient safety. However, after the accident turned from mayhem to a nightmare, the chagrin of the public, who would rather not deal with their source of seafood being polluted, their beaches altercated and their marine environment abused, became rather pronounced and evident. But BP executives, who were bent on playing it safe, failing to appreciate the gravity of the nightmare, made unfortunate statements that are better forgotten; and we now know, they wish they could take back.

Accidental explosions and oil spills seem to be an endemic problem in oil exploration, off- and on-shore. The Deepwater Horizon explosion was not going to be an exception; however, the size of the explosion and the spread of escaping oil from the Macondo well, were daunting, miserable and overwhelming. According to the new government regulatory agency, the Bureau of Ocean Energy, Regulation and Enforcement, British Petroleum spilled 205 million gallons of oil into the Gulf of Mexico. Most Americans expected lesser volume and would have preferred the management at British Petroleum were more safety cautious with respect to off-shore drilling; and probably in all their company’s operations. While executives in the petroleum industry saw the example of BP oil spill at the Macondo well as a public relations disaster for the industry as a whole, British Petroleum and its executives continued to portray the oil spill as a problem for their associated contractors, Halliburton and Transocean.

The volume of oil and gas spilled into the Gulf of Mexico and the associated pollution of marine life, beaches and habitat indicate that corporate bosses at British Petroleum failed to appreciate the gravity of the spill and the nightmare of the deaths and explosion at the Deepwater Horizon rig and what messages it carried with it across the globe. The oil and gas industry were working hard to help everyone understand the challenges of exploration for gas and oil, while at the same time, hoping that BP executives will take early responsibility for their actions or inaction, and get the industry past the nightmare.

The strategy adopted by BP management to initially cover up the impact of the accident, made matters worse and eventually led to an unforgiveable perception of failure of leadership at the company. Many residents in the Gulf States, who saw their livelihood depleted, savings account and or business go bankrupt, and who had a first hand experience of the impact of the explosion at the Deepwater Horizon dig, were completely disillusioned when it seems the executives at BP were not going to take responsibility for the accident. It was probably the stepping in of the Whitehouse, holding BP and its executives accountable for the inexcusable failure of leadership of management in the handling of the aftermath of the accidental explosion at the Deepwater Horizon rig, was it clearer to BP that it was not going to go Scot free on this one. Not only were the management at BP made accountable and asked to have a down payment of 20 billion dollars in compensation for the potential impact of the accident on the way of life of residents of the Gulf Coast, they were asked to submit their operations regarding the management of the aftermath of accident to a government agency; a national command control center headed by a retiring Admiral of the United States Coast Guard to oversee the whole process. The national control center became the co-coordinator of the clean-up process, including contemplated engineering processes for stopping the endless oil and gas leaks from the Macondo well.

Admiral Thad Allan of the United States Coast Guard, who supervised the aftermath of the explosion and directed the activities of British Petroleum in managing the clean-up efforts from the National Command Control Center, confirmed so many fears of the public regarding the oil leaks into the Gulf of Mexico; and, gave the public a better perspective of what really went wrong on April 20, 2010, when balls of fire and explosions led eleven oil men from either British Petroleum, Transocean or Halliburton, to meet their God. According to oil industry experts, it wasn’t the fact that there was an oil spill at the Macondo well that really mattered, it was the fact that BP’s Management failed to appreciate the challenges of drilling off-shore at a horrendous depth below the sea level, a foray no other oil company had over gone, and to rapidly respond to the explosion and its aftermath, that actually complicated the problem, turning a mayhem to the nightmare in the glare of the whole world. Not only did British Petroleum executives failed that night, the whole Petroleum industry got a black eye which only time can tell, if the industry will ever receive the type of confidence once reposed in their operations and explorations for oil and gas, offshore.

As BP Board continued to switch Chief Executive Officers, Tony Hayward to Bob Dudley, thinking it was more important to have a new face in the CEO’s office rather than instituting a bottom up investigation and evaluation of how the company manages its safety issues and encourage associated contractors of the company, to abide by the same safety standard expected of any company venturing into deep-sea off-shore drilling, it became very evident that the whole organization had lost its bearing temporarily and probably most of its reputation; and, what was left of the company's reputation, no company in the oil and gas industry that wants to be taken seriously, would ever want or attempt to emulate. The BP's brand was so much bastardized that for some time, the board at BP was confused regarding the best action to take, or order of apologies to offer, and what best avenue to use in offering the apologies, regarding the failure of leadership at the executive suites of BP.

American public expect oil companies, particularly those venturing into deep sea off-shore drilling at horrendous depth, to maintain a safety standard that will ensure employee and public safety. While good record keeping on issues of safety management on rigs and platforms are part of these expectations, many oil and gas companies’ executives, who were seeking oil and gas permits for drilling in American soil and waters, understand that oil and gas exploration and extraction off-shore, come with a caveat. Oil and gas companies venturing into greater depths must remain engaged with all the steps and processes involved in the exploration and extraction of oil and gas; whether directly or through a contractor, associated subcontractors, or subsidiary of the company. The technology, research and development information in off-shore oil explorations and extraction are changing in leaps and bounds and no one unit or organization can understand the whole process and blue prints, and it may be necessary to seek crucial advice and information in managing the next step in operations to avert accidents as that at the Deepwater Horizon rig. This is probably why the new consortium and collaboration to manage horrendous oil spill and disaster, if one ever comes up, is in order in the oil and gas industry

A comprehensive and objective review of the whole accidental explosion and associated aftermaths will show that British Petroleum executives probably failed to remain engaged in all the steps and processes involved in drilling and maintaining the Deepwater Horizon rig. The unfortunate repercussion of that failure led to the nightmare that the spill from the Macondo well, ultimately became. Further, the failure of contractors to British Petroleum to probably develop a strategy for improving the process of managing accidental failures of equipment and BP’s unconscious oversight to ensure that their contractors meet minimum standard for managing potential failures of safety equipment, and other associated events, probably led to the accident at the Deepwater Horizon rig.

A higher expectation of decision making by executives at a multinational conglomerate as the British Petroleum, Transocean and Halliburton isn’t beyond the description of their positions; and, can hardly be excluded from an enterprise whose stocks are publicly traded. Commitment to accountability of leadership of such companies is often tied to executive compensation. When executives fail to act or are negligent in their decision making, it is imperative that they are penalized. Unfortunately, this has not been the case at British Petroleum and or its subcontractors. It was with great dismay when Transocean, one of the sub contractors at the Deepwater Horizon rig, condescended to offering executives of the company, performance incentives for safety performance in the past year. When executives are highly compensated as those at BP, Transocean, Halliburton and many other companies, it is expected that they give their all; or at least, do the job to keep employees safe. When these companies and their executives fail, it is a high order of hypocrisy to offer anyone in the executive suite additional compensation for a service that was not rendered and to paper the action over, as if nothing of error had been committed by the executives, in the way they manage the businesses of the company.

BP Shareholders probably demand performance from the company’s executive suites; hopefully, it isn’t at the expense of the lives of innocent workers. The kind of accidental explosion at the Deepwater Horizon rig and probably insensitive cover-ups and statements made by executives at BP, ought to be fully investigated and anyone found wanting, punished for dereliction of duties and the deaths of those eleven workers. Paying safety management or performance incentives to any executives in any of the three companies associated with the Deepwater Horizon’s disaster must be questionable.

Further, reading out names of ill-fated employees at the annual BP shareholder’s meeting, far away in London, could not be considered as adequate in any form for the grieving family members from the Deepwater Horizon disaster, so is any ploy to pay executives for safety performance incentives of any kind in this past year to anyone associated with this disaster. Any effort to make such pay-out must be considered, criminally culpable. That is why a criminal investigation of what transpired on the night of that explosion at the Deepwater Horizon rig by the US Justice Department, is not out of order.

Recent emerging findings regarding the accident, both within British Petroleum and outside of the company, from Scientists at Laboratories, Universities, Regulatory Agencies and Industry Experts and Associations, indicate that there is still real work to be done at BP and its associated contractors’ executive offices, regarding the issue of safety management. Accidental explosions at work sites, while still not widespread among the three companies which worked on the Macondo well, an exception could be made for British Petroleum, whose accidental records at company’s sites and refineries since 2005 seems to have escalated with the Macondo well explosion. BP had suffered accidental deaths at its refinery at Waco, Texas; a dubious badge that makes BP’s safety records a dismal one; and, probably a byproduct of the company’s culture of operations. With the Deepwater Horizon disaster, it can now be said that, once in every five years in the past decade, British petroleum has suffered an accidental explosion at its work sites that has led to the deaths of at least ten workers. Even, if British Petroleum and executives would like to deny full responsibility for the workplace accidents, there are public records showing probably cause of accidental explosions and deaths of innocent employees at British Petroleum refinery and rigs or platforms.

A Call for Action

It is clear that US Government would like to find out what exactly is happening at British Petroleum that is leading to repeat workplace accidents and deaths. It is probably clear also, that the Board at British Petroleum is interested in changes to the operations at British Petroleum, so that accidental explosions, oil spills and deaths are things of the past. However, the task still remains with the culture in the organization regarding workplace safety: Are executives and management of the enterprise on-board with a new plan to ameliorate accidental explosions and spills or not? Is management serious about dealing with the problems of workplace accidents and explosions or not? What kinds of steps on safety management are valuable for the kind of operations at British Petroleum? Answers to these questions are now paramount.

Part of the success of the Board of an enterprise, depends on how the executives of the enterprise handle challenges and manage risks with respect to its operations. While the Board of an enterprise, may seek changes in the way executives at the enterprise manage challenges and risks, it still behooves those handling the day-to-day operations of the enterprise to remain committed to the goal. Are current executives and management at BP committed to finding lasting solutions to the accidental explosions, deaths and spills at British Petroleum’s refineries and rigs? Is the rank and file willing to work with management of BP enterprise to ensure that repeat accidents are substituted with safe work environment? Tentative plans or diversionary tactics like seeking to shift dependence on US oil exploration and extractions may seem advisable at this time, but they will remain cosmetics, as other companies are willing and ready to take-off from where BP had failed, woefully.

It is possible that public pressures like demonstrations at annual shareholder’s meeting may influence the way things work out at BP with respect to safety management. It is also possible that investors registering their disapproval of an accidental explosion that led to the deaths of employees may have an impact on the Board’s decision on where the company should be heading, or the conscience of executives and management at BP, with respect to the issue of safety management in the whole organization; however, it is imperative that the Board, executives and management, seek out new ways for finding lasting solutions to the accidental deaths and explosions at British Petroleum’s work-sites.

Finally, when hundreds of BP investors frown at the loss of $55 billion in market value in the past year and are complaining about the issues of executive compensation, transparency and safety improvement, definitely, some new and radical approach are necessary to address these issues and agenda before BP Board. The leadership at BP, the Board, Executives and Management, must now realize that investors, just like the public, are not particularly happy with the operations of the company, including of course, the way the aftermath of the Deep-water Horizon rig accident was handled.

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