Ethical Issues of British Petroleum Oil Spill - Term Paper Example

?Ethical Issues of British Petroleum Oil Spill Profile the Company British Petroleum (BP) is an international oil and gas company. In its official website, the company says that it provides its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items ( BP at a Glance, 2010). The company operates across six continents and over 80 countries. The corporate headquarters of BP is located in London. Therefore UK is the centre for trading, legal, finance and other mainstream business functions of BP. The Company has two segments: Exploration and Production, and Refining and Marketing (BP PLC (BP), 2011). Its Exploration and Production’s activities falls under three key areas. The first is upstream activities which include oil and natural gas exploration, field development and production. The second is Midstream activities which include pipeline, transportation and processing activities related to its upstream activities (BP PLC (BP), 2011). The third is marketing and trading activities which include the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs) (BP PLC (BP), 2011). Refining and Marketing activities include the supply and trading, refining, manufacturing, marketing and transportation of crude oil, petroleum and petrochemicals products (BPPLCBP), 2011). History The history of the company starts in 1908 when oil found in a rugged part of Persia after a long and difficult search. It was Mr D’Arcy who financed the oil exploration. Mr Reynolds was the explorer. The discovery was due to the patience of Reynolds. By the early morning of 26 May 1908, the drill reached 1,180 feet and a fountain of oil spewed out into the dawn sky ( BP at a Glance, 2010). Within one year, the Anglo-Persian Oil Company, which would one day become BP, was in business ( BP at a Glance, 2010). But the company became bankrupt soon and the then British Prime Minister Winston Churchill took the initiative to finance the company by the government. He argued in the parliament that that it is necessary to protect British interests. The British government seized the company’s assets during First World War. During the Second World War, the British government asked Anglo-Iranian to find more oil on British soil and it was successful. After the war, the nationalists throughout the Middle East angrily questioned Western companies’ right to profit from Middle Eastern resources ( BP at a Glance, 2010). Anti-British sentiment also increased. The agreement between the former Shah of Persia and William D’Arcy expired in 1954, and the director board changed the company’s name to The British Petroleum Company ( BP at a Glance, 2010). Later unexpected changes took place in the Middle East. Ghaddafi and other Middle Eastern countries declared that they will nationalise energy companies in ten years. So, by 1983, BP’s oil supply from Middle East was reduced from 80% to meagre 10%. Fortunately BP had discovered major oil fields in other parts of the world, including Prudhoe Bay in Alaska and the Forties field off the coast of Scotland ( BP at a Glance, 2010). In 1987 BP bought Standard Oil of Ohio (Sohio) incorporating it into a new national business, BP America. That same year the British government sold the last of the shares it held in BP ( BP at a Glance, 2010). With major, long-term projects in Russia, the Gulf of Mexico, North America, Azerbaijan, Indonesia and elsewhere, BP had a lot of oil and gas (BP at a Glance, 2010). Mission The mission of BP is to help the world meet the growing demand for heat, light and transportation. This is achieved by finding efficient and cleaner ways to produce energy that’s affordable and safe. To meet that goal, BP is progressive, responsible, innovative and performance driven (Our culture and values , 2011) Ethics Background The BP has a code of conduct. The company says that it is part of the ethics program and is supported by the directors and senior leadership. Its purpose is to promote a positive, ethical work environment for all employees. BP emphasises on doing the right thing the right way (Our commitment to integrity). The company’s code says that it seeks to prevent unlawful or unethical business conduct and to detect it if it occurs. The company says that it continuously assesses compliance risks and ensures that internal controls are responsive to these risks. Code The Code of Conduct of BP covers five key areas of business operations: They are the following. Protect the natural environment, the safety of the communities and the health, safety and security of our people (Our culture and values , 2011). Fair treatment and equal opportunity for employees (Our culture and values , 2011). Providing detailed guidance on giving and receiving gifts and entertainment, conflicts of interest, competition etc (Our culture and values , 2011). The code covers such areas as bribery, dealing with governments, community engagement, external communications and political activity (Our culture and values , 2011). The code contains guidance about accurate and complete records and reporting etc (Our culture and values , 2011). Pledge The code says all employees must adhere to the principles and requirements contained in the code and should consult the code for guidance when acting on behalf of BP. Training Every employ joining BP becomes part of a specially-designed graduate development programme. According to BP, this comprehensive development programme acts as a foundation for future career at BP; on-the-job learning develops practical skills, confidence, and structured training ensures up-to-date knowledge in the chosen discipline and reinforce what have learned whilst performing day to day responsibilities (Training and Development , 2011). The company also ensures that “soft skills” are continuously being developed, by giving coaching on things like presentation skills and communication. How did it happen? The Deepwater Horizon mobile offshore drilling unit was owned by a Swiss company Transocean. It was under lease to BP. On April 20, 2010, an explosion occurred in BP's Deepwater Horizon oil rig in the Gulf of Mexico, 52 miles southeast of the Louisiana port of Venice. It sunk after two days. The rig was drilling, but not in production (Michael Graham Richard, 2010). Of the 126 workers, 11 are missing. On April 26, Search-and-rescue operations have been suspended with 11 people still missing, while underwater robots have discovered at least two leaks that are dumping an estimated 1,000 barrels of oil per day in the sea. (Michael Graham Richard, 2010). Experts said that stopping the leak is technically challenging and would take months. On April 28, the U.S. Coast Guard suggested setting the oil slick on fire. (Michael Graham Richard, 2010). On April 28, the oil slick has reached the Mississippi Delta. It was also reported that leak is spewing the equivalent of 5,000 barrels of oil per day. On April 30, Obama put a halt on all offshore drilling. On May I, sky truth, a non profit organisation estimated using satellite images and radar that oil was leaking at the rate of 25,000 barrels/day. On May 3, BP tried to install a shut off valve in one of the three leaks. On May 5, BP said it succeeded in plugging one of the leaks. Efforts to stop one of the oil leaks with a containment dome became a failure on May 8. On May 10, NASA released pictures of oil taken from International Space Station. On May 12, BP finally decided to release pictures of the underwater oil leak, allowing independent scientists and engineers to have a look (Michael Graham Richard, 2010). On May 16, BP succeeded in inserting a tube into the leaking riser pile of the well and captured some oil and gas. But, when compared to what is still leaking out, it was meagre. On May 27, top kill operation was attempted, but given up later. The leak continued for 87 days. Leadership issue The leaders of BP are ultimately responsible for this environmental disaster. It appears that CEO Tony Hayward presided over an organisational culture that encouraged extreme risk-taking, ignored expert advice, overlooked safety and hid facts (Corkindale, 2010). Their failure to respond to the disaster with sufficient speed and attention was the result of this flawed culture (Corkindale, 2010). Culture Issue BP’s safety record was worse than general perception. The company complained openly and lobbied to oppose safety regulations, and opted out of the $500,000 safety valve that could have prevented the rupture (Merchant, 2010). The ethical leakage in BP is far more dangerous than the oil spill. Facts show that the project was late and costing at least $500,000 a day in overruns; engineers were hurrying; they cut corners on the well design and safety features (Moynihan, 2010). In an email four days before the well exploded, a BP official mentioned that an engineer had recommended using 21 “centralisers”. But the official said that it will take 10 hours to install them and that he does not like it (Moynihan, 2010). On the same day, another official had recognised the risk using only six centralisers but said, “Who cares, it’s done, end of story, will probably be fine (Moynihan, 2010).” How did it become public? Self Disclosure It was on April 24, 2010 that BP admitted that there was a spill. Whistleblower On May 12, BP released a short, pre-recorded clip of the underwater blowout (Eley, 2011). A journalist from National Public Radio (NPR) showed the footage to three experts for separate types of scientific analysis. Timothy Crone, a scientist at the Lamont-Doherty Earth Observatory, put the spill rate at 50,000 barrels per day (Eley, 2011). What was the Result of the Issue? About five million barrels of oil were released into the Gulf from a BP well in the United States’ exclusive economic zone (Godoy, 2011). Of these only 800,000 were captured through containment efforts. According to the National Oil Spill Commission set up by Barack Obama, this was entirely "avoidable" ( BP oil spill: Deepwater, deep trouble, 2011). It says that better management by BP, [and its key contractors] Halliburton and Transocean would almost certainly have prevented the blowout. ( BP oil spill: Deepwater, deep trouble, 2011). Jail In spite of the fact that basic safety concerns were flouted, not a single executive from any of the companies— owner of BP, rig operator Transocean, and rig contractor Halliburton—has been punished (Eley, 2011). Stock/Increase/Decline Its value was $59.52 on the day of the accident. Now, its value is $44.68 a share (Gelsi, 2011). Merger BP's planned $18 billion tie-up with Russia's Rosneft has become more uncertain after chief backer Igor Sechin stood down as Rosneft chairman ( Deals of the day -- mergers and acquisitions, 2011). Business Dissolved BP PLC agreed to sell its Arco Aluminum Inc. unit to a Japanese consortium for $680 million, as it steps up a divestment program to recoup the costs of its Gulf of Mexico oil spill (Benoit Faucon, 2011). If Company Survived: The company survived and new lessons learned. The company in its lessons learned report says that timely and reliable information was essential across both the containment and response operations to achieve better decision-making and safety (Deepwater Horizon containment and response , 2011). What is different today? BP has joined the Marine Well Containment Company, an initiative with ExxonMobil, Shell, ConocoPhillips and Chevron designed to deploy effective equipment in the event of underwater blowout (Deepwater Horizon containment and response , 2011). Would new rules prevented old problem?   The newly-formed Global Deepwater Response Team is charged with sharing the insights and experience gained from the incident with BP staff involved in other deepwater projects as well as with partner companies, regulators and others in various countries where BP have offshore operations (Deepwater Horizon containment and response , 2011). By the new rules and insights gained from the incident, BP hopes to prevent the old problems. Works Cited BP at a Glance. (2010). Retrieved April 23, 2011, from bp: http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926 BP oil spill: Deepwater, deep trouble. (2011, January 7). Retrieved April 24, 2011, from guardian.co.uk: http://www.guardian.co.uk/commentisfree/2011/jan/07/bp-oil-spill Deals of the day -- mergers and acquisitions. (2011, April 12). Retrieved April 24, 2011, from Reuters: http://www.reuters.com/article/2011/04/12/mergers-deals-idUSL3E7FC1AC20110412 Benoit Faucon, J. (2011, April 4). BP to Sell Arco for $680 Million. Retrieved April 24, 2011, from The Wall Street journal: http://online.wsj.com/article/SB10001424052748703806304576242050472870220.html?mod=googlenews_wsj BP PLC (BP). (2011, April 21). Retrieved april 23, 2011, from Reuters: http://www.reuters.com/finance/stocks/companyProfile?rpc=66&symbol=BP Corkindale, G. (2010, June 28). Five Leadership Lessons from the BP Oil Spill. Retrieved April 24, 2011, from Harward Business Review: http://blogs.hbr.org/corkindale/2010/06/five_lessons_in_leadership_fro.html Deepwater Horizon containment and response . (2011). Retrieved April 24, 2011, from bp: http://www.bp.com/sectiongenericarticle.do?categoryId=9036597&contentId=7067572 Eley, T. (2011, pril 20). One year since the BP oil spill: Covering up a catastrophe. Retrieved April 24, 2011, from Axis of Logic: http://axisoflogic.com/artman/publish/Article_62831.shtml Gelsi, S. (2011, April 20). BP shares still limping after Gulf spill. Retrieved April 24, 2011, from The Wall Street Journal: http://www.marketwatch.com/story/bp-shares-still-limping-after-gulf-spill-2011-04-20?link=MW_latest_news Godoy, E. (2011, April 19). Impacts of BP oil spill remain hidden in Mexican waters. Retrieved April 24, 2011, from Caribbean 360: http://www.caribbean360.com/news/359217.html#axzz207YJaZ7i Merchant, B. (2010, May 5). BP's Cost-Cutting Measures Could Imperil Safety, Congressmen Said 3 Months Ago. Retrieved April 24, 2011, from treehugger: http://www.treehugger.com/files/2010/05/bp-cost-cutting-safety-congressmen-3-months.php Michael Graham Richard. (2010, May 5). BP Gulf Oil Spill Cheat Sheet: A Timeline of Unfortunate Events . Retrieved April 24, 2011, from TreeHugger: file:///C:/Documents%20and%20Settings/biju/Desktop/bp-gulf-oil-spill-timeline.php.htm Moynihan, C. (2010, June 19). BP: creaky ethics in the Gulf oil spill. Retrieved April 24, 2011, from Spero News: http://www.speroforum.com/a/35142/BP-creaky-ethics-in-the-Gulf-oil-spill Our commitment to integrity. (n.d.). Retrieved April 24, 2011, from http://www.bp.com/liveassets/bp_internet/globalbp/STAGING/global_assets/downloads/C/coc_en_overview.pdf Our culture and values . (2011, ). Retrieved April 24, 2011, from bp: http://www.bp.com/sectiongenericarticle.do?categoryId=9031562&contentId=7057901 Smith, C. (2010, June 9). Network Analysis and the BP Oil Spill. Retrieved April 24, 2011, from CSEDEV: http://www.csedev.com/network-analysis-and-the-bp-oil-spill/ Training and Development . (2011). Retrieved April 24, 2011, from BP: http://www.bp.com/sectiongenericarticle.do?categoryId=9023589&contentId=7043858 Read More