Bp Deep Water Horizontal Explosion

Topics: Petroleum, BP, Decision making Pages: 9 (3139 words) Published: July 16, 2013
INTRODUCTION
BP originated from a British petroleum company founded in 1909. After experiencing crises during the 1980s-1990s, the company started to have a cost cutting culture. During mid-1990s, with an aggressive growth strategy, BP started to grow and reposition. After BP merged with Amoco in 1998, John Browne started to serve as chief executive until May 2007. Browne repositioned BP as a “green” oil company after he took over and practiced the model of organizational decision-making strategy, known as “asset federation.” Under this new strategy, onsite asset managers had the authority to make decisions, and employees’ compensation was directly tied to asset performance (Ingersoll et. al, 4). Many decisions made by John Browne were directly related to the Deepwater Horizon explosion. In 2007, Tony Hayward replaced John Browne and became the new chief executive. Tony Hayward slightly adjusted BP’s organizational structure and decided to pay more attention to BP’s safety issues and risk averse culture. However, the Deepwater Horizon explosion happened when Tony Hayward was in charge. The BP Deepwater Horizon oil explosion occurred in the Gulf of Mexico on April 20, 2010, which is considered as the largest accidental marine oil spill in the history of the petroleum industry. The Deepwater Horizon oil spill caused tremendous damages to the surrounding environment and enormous losses to shareholders. BP acquired the right of operating the Macondo Well Project from the U.S. Minerals Management Service in 2009, and then BP leased the Deepwater Horizon rig from Transocean who provides offshore drilling equipment and personnel operation. Both BP and Transocean operated the Deepwater Horizon when the disaster happened. The Deepwater Horizon explosion resulted in major damages and losses. When the explosion occurred, workers abandoned ship and jumped into the burning ocean. Among the 126 workers on board the Deepwater Horizon, 17 were injured and 11 died. Additionally, the rig burned down 700,000 gallons of oil within 36 hours, and the smoke trail spread over 30 miles (Ingersoll et. al, 2). BP’s stock price declined dramatically after the explosion. The disaster not only dragged BP into the major scandal but also destroyed many surrounding businesses and families. The consequences of the explosion affected not only organization, shareholders, and employees but also the environment, social issues, and public relations. The Deepwater Horizon disaster had many causes, direct and indirect; it mainly involved people-issues, managers and managing, organizational weaknesses, and external oversight and accountability. “CAUSES” OF THE EXPLOSION

Firstly, individuals in an organization always have decision-making biases, and thus they would have a “huge capacity to rationalize their behavior” (Crews). Individuals usually make decisions subjectively based on their value set. The former CEO John Browne set up how BP would develop after mid 90’s; he also was the key person who affected the future of Tony Hayward. Browne relied on and promoted Hayward. A metaphor in Elkind’s article said that Hayward was favored prince of Browne, and Browne opened Hayward’s eyes to the world of business (Elkind et. al, 9). It was not clear why Browne relied on Hayward so much, but he made Hayward become the CEO of BP. On the other hand, Browne played an important role in BP’s management strategy. Browne decided to focus on cutting costs and had a desire to make BP become the largest oil producer. He created the big picture of BP’s development, which influenced the future CEO Hayward’s value set of decision-making and employees’ behaviors in BP. Not only managers had bias of decision-making, the engineers who constructed and maintained the rig also had bias. BP chose long string casing for the Macondo well because several individuals overvalued the cost. As a result, the well casing choice created the condition of the rig’s explosion (Ingersoll et. al,...

Cited: Elkind, Peter, David Whitford, and Doris Burke. “An Accident Waiting to Happen.” Fortune.
February 7, 2011.
Fodor, Andy and John Stowe. “Financial Market Reactions to a Company Disaster: The BP Case.” Journal of Applied Finance. Issue 1, 2012.
Helman, Christopher. “BP Is Booming (Shhh!).” Forbes. May 7, 2012.
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