British Petroleum Deep-Water Opportunities - Essay Example

Title: BRITISH PETROLEUM DEEP-WATER HORIZON (Name) (Instructor) (Institution) (Course code) (Date) Background Information On 20th April 2010, the Deep-water Horizon oil rig, on BP’s Macondo exploration well in the Gulf of Mexico exploded and caused devastating effects, which are still being faced years after the incidence (Benoit, 2011). After the explosion, the rig sank and consequently, oil spilled into the Gulf of Mexico for 87 days before it was capped on 15th July 2010 (Benoit, 2011). According to Freudenburg and Gramling (2011), the accident claimed eleven people, with the U.S government estimating that a total of 4.9 million barrels of oil had spilled into the Gulf. The oil spill is considered as the most devastating in U.S history. After the explosion and sinking of the Deep-water Horizon oil rig, employees from B.P and Transocean together with other government institutions responded with a bid to manage the spread of the oil to other coastal ecosystems (Benoit, 2011). The devastating oil spill resulted into massive effects on marine ecosystem. The Gulf oil spill resulted into the deaths of marine animals and affected the tourism industry negatively. The U.S government held BP responsible for the marine accident, as evidenced by the ensuing legal battles regarding the case (Nelson, 2010). Since the Gulf oil spill largely involved BP, the petroleum company had to respond towards alleviating the serious effects of the accident. Indeed, the Gulf of Mexico oil spill was a major blow to BP. The Clean-up Process The Gulf of Mexico spill raised a myriad of concerns that triggered the US government to take the necessary steps towards containing the issue. At the centre of the oil leaking incidence was BP, whose Macondo establishment had caused the unfortunate event. In light of this, the company had to gather resources, both financially and human capital in order to respond to the crisis. According to Nelson (2010), the crisis raised international concerns, and invited experts and resources from other countries to help in controlling the oil spill. BP worked closely with government agencies, researchers and experts in the petroleum industry to clean up, and reduce the effects of the oil spill. The main strategies used in the clean-up exercise were containing, removing and dispersing the oil (Painia and Dugan, 2012). Furthermore, the team of experts was obliged to come up with feasible strategies of protecting the shoreline from the oil that came on shore. The clean-up process involved the combined efforts of about 48,000 personnel and the utilization of 6,500 vessels (Painia and Dugan, 2012). By the beginning of 2013, the clean-up exercise was still underway, with a total of 935 personnel actively participating in the exercise (Painia and Dugan, 2012). It is worth noting that at this time, according to Nelson (2010), BP had spent more than $14 billion in the process. Containment booms occupying an area of more than 1,300 km were set up to enclose the spreading oil or act as a barrier to protect marine life from the effects of the oil. Dispersants were also used to control the spread of the spill and to protect the delicate ecosystem in the Gulf of Mexico. Since the intensity of the oil was huge, dispersants were used to break the oil into smaller layers, which could be handled easily. Due to the massive oil spill, BP and the team of experts used approximately 1.84 million gallons of dispersants (Nelson, B. (2010). Despite the initial reports that the use of dispersants was the most efficient in reducing the impact of the spill on the shoreline, scientists working on the clean-up process argued that the dispersants, particularly the corexit dispersant, was poisoning marine life (Nelson, 2010). After the realization, BP was ordered to use the corexit dispersant sparingly to avoid further effects on the ecosystem. After a series of experiments from researchers and scientists, BP was given a go ahead to continue with the use of the dispersant, since it had fewer effects on the environment as compared to the oil (Nelson, 2010). The continued use of dispersants ensured that the large layers of oil were broken down, thus preventing the oil from reaching the shoreline. The clean-up process also involved removal of the oil from the surfaces of the water. The strategies used in the removal process included, offshore filtration and incineration (Wilde and Skrobialowski, 2011). The clean-up process also involved collection of oil from the water surface. Skimmers were used to collect oil from the water, which was being processed later. Scientists who were involved in the clean-up exercise introduced the idea that microbes could be used to eliminate the oil. They argued that dispersants, once mixed with oil, produced microbes that ate the oil before it emerged into the water surface (Wilde and Skrobialowski, 2011). Researchers highlighted that the microbes contributed significantly in reducing the amount of oil in the water. Impacts of the Oil Spill The devastating nature of the Gulf of Mexico oil spill brought about impacts on various fronts. Health concerns were reported after the spill, with hundreds of people suffering from the chemicals emanating from the oil (McCoy, 2010). The workers involved in the clean-up exercise were mostly affected because they came into contact with the oil and the chemicals used in the exercise. According to McCoy (2010), the total number of the workers who reported cases of intoxication was 108. Reports indicated that the use of dispersants contributed in the heightened health hazards because once they mixed with the oil, the amount of toxic materials increased. The locals also reported cases of health complications as a result of the oil spill. Medical experts argued that the disaster caused short-term and long-term health complications like mental and respiratory diseases to the clean-up workers and the local residents of the Gulf (McCoy, 2010). After a series of tests on BP’s clean up employees and residents of the affected areas, it was discovered that some of them were exposed to the toxic chemicals. According to health officials from Louisiana, the oil spill was a huge public health challenge that needed to be handled with utmost care (McCoy, 2010). On the economic front, the oil had a huge impact on the economy of the locals. The tourism sector was adversely affected by the accident. The health hazards posed by the marine accident meant that the tourists had to evacuate the Gulf area, thus affecting the economic balance of the locals (Painia and Dugan, 2012). According to the US Travel Association, the estimated loss stemming from a decline in tourism returns over a 3 year period amounted to over $23 billion (Painia and Dugan, 2012) Furthermore, the residents of Louisiana suffered an economic loss because of the suspension of offshore drilling because of the impact of the oil spill (Nelson, 2010). The fishing industry, which was a core economic source for the coastal residents, meant that they had to look for alternative means of income. BP was also affected economically by the accident. Since the company was largely responsible for the oil leakage into the Gulf waters, it suffered massive loses as it handled the issue. The costs that the company suffered included legal fines and penalties, compensating the Gulf States and financing the clean-up process. Moreover, the oil spill damaged the company’s corporate image, thus affecting its market shares. The government of the US suspended its contracts with the company on a temporary basis (Nelson, 2010). The decline in the company’s market value and share affected its shareholders’ confidence, hence intensifying its economic challenges. After the Gulf oil spilling incidence, oil companies suffered a major setback as the US government suspended the release of contracts to offshore drilling companies. The directive, given by President Obama meant than BP and other companies were to discontinue their operations, pending investigations on the causes of the catastrophic oil spill (Painia and Dugan, 2012). The incidence not only raised concerns in the US, but also in other countries, bearing in mind that oil corporations conducted their businesses on a global scale. In Canada, oil companies had to comply with safety rules in order for them to operate in the Canadian Arctic (Painia and Dugan, 2012). State governments in the U.S also had to put forward legislations regulating offshore drilling in order to avoid the occurrence of such an incidence (Painia and Dugan, 2012). For instance the state of California withdrew its support for the extension of offshore drilling in its territory (Painia and Dugan, 2012). The magnitude of effects from the BP oil spill mirrors its recognition as the most catastrophic marine accident in US history. Evaluation of BP’s Crisis Response It is extremely significant for a company to have the right approach when responding to a crisis. Recovering from a crisis calls upon companies to take actions that build their reputations in their sphere of operation. In respect, to the BusinessWeek’s five-step model for handling a crisis, I will evaluate BP’s actions in responding to the crisis. Firstly, the company’s ability to offer communication after the oil spilling incidence was the right thing to do. The company did not put people in suspense over the marine accident, but it communicated to its stakeholders accordingly. In addition, the company took the right steps in being empathetic about the unfortunate crisis. The crisis brought immense damage on the marine life and also the economic spheres that relied on the Gulf waters. In light of this, BP took the right move in acknowledging its responsibility in the issue. The ability to express genuine consideration on the crisis, especially for those who lost their lives was a significant response in safeguarding the company’s brand image. However, there are various aspects that the company should have done differently in order to improve its response and management of the crisis. The company should not have shifted the blame of oil leak to its contractors. According to Webb (2010), the BP’s Chief Executive Tony Hayward was at fault by shifting the blame to Transocean, the drilling contractor, and Halliburton, the company responsible for cementing the oil rig. Though the blame did not fall squarely on BP because the company’s contractors (Transocean and Halliburton) were also responsible for the crisis, the Chief Executive got it wrong because his company was actively involved in the project as a major partner. For the sake of protecting the company’s reputation during and after the crisis, the Chief Executive should have accepted responsibility for the incidence, bearing in mind that BP is a company with international ties. Secondly, on the issue of transparency on the crisis, the company should have maintained constancy in its communication to stakeholders, especially reporters. Broader (2011) asserts that the company’s spokesman was not giving correct information regarding the clean-up exercise. According to Broader (2011), the company’s spokesman was giving inconsistent information about the number of barrels of oil that were leaking every day. The spokesman reported 1000 barrels of oil leaking every day, while other reports indicated 5,000 barrels of oil (Broader, 2011). The inability to portray transparency while handling a crisis can easily damage a company’s credibility. In respect to the crisis, there are on-going environmental obligations that BP is undertaking. BP has continually committed itself in alleviating the impact of the oil accident. The company has committed itself to work together with the National Resource Damage Assessment to restore the environment, and has already donated $1billion towards the course (Nelson, 2010). The project aims at conducting sufficient research on determining environmental degradation and how to effectively restore it. The company is obliged to support ecological endeavors that enhance natural resources. In order for the company to manage the crisis well, and build its reputation as a multinational corporation, it is important for it to develop a feasible communication platform to communicate with the public. First and foremost, I recommend that the company embraces a transparent approach while handling a crisis moment. This will enable the company to guard its image, since it is easy for a company of such repute to lose its credentials if it does not handle a crisis with integrity. If the company communicates effectively with the relevant stakeholders, it will be in a good position to respond to, and handle the crisis in an effective way. Of importance still, is the ability of the company to have a spokesperson conversant with the underlying issues, in order to competently speak on its behalf. Handling the crisis in a professional way deems it necessary for the company to have a communications specialist. The specialist will be the image of the company to its stakeholders. Acquiring such a resource will play a significant role in enhancing its credibility. Effective management of a crisis should be a top priority for the management of any company. Some crisis are inevitable, thus it is imperative for a business to be adequately prepared to handle uncertainties. Certainly, BP’s case is a reflection of a company’s need for preparedness when a crisis strikes. References Top of Form Bottom of Form Benoit, P. (2011). The BP Oil Spill. New York: Children's Press. Top of Form Bottom of Form Freudenburg, W., & Gramling, R. (2011). Blowout In The Gulf: The BP Oil Spill Disaster And The Future Of Energy In America. Cambridge, Mass.: MIT Press. Top of Form Bottom of Form McCoy, M. (2010). Assessing The Effects Of The Gulf of Mexico Oil Spill On Human Health: A Summary Of The June 2010 Workshop. Washington, D.C.: National Academies Press. Top of Form Bottom of Form Nelson, B. (2010). The Gulf of Mexico oil spill: Economic and environmental consequences of the Deepwater Horizon disaster - should the federal government stop all new offshore oil drilling? Bethesda, MD: Congressional Digest. Top of Form Bottom of Form Painia, B., & Dugan, M. (2012). The Great Advertising Campaign The Effectiveness Of British Petroleum's Post-Oil Spill Campaign. Hattiesburg, Miss.: University of Southern Mississippi. Top of Form Bottom of Form Wilde, F., & Skrobialowski, S. (2011). U.S. Geological Survey Protocol For Sample Collection In Response To The Deepwater Horizon Oil Spill, Gulf Of Mexico, 2010 Sampling Methods For Water, Sediment, Benthic Invertebrates, And Microorganisms In Coastal Environments. Reston, Va.: U.S. Dept. of the Interior, U.S. Geological Survey. Webb, T. (2010). BP's clumsy response to oil spill threatens to make a bad situation worse. The Guardian. 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