BP's Management Crisis
The Frontline report, “The Spill”, which focused on British Petroleum's problematic management culture and its catastrophic effects, aired on October 26, 2010. Around then, the oil giant BP had suffered a crisis with its latest off-shore oil rig, the Deepwater Horizon. However, this was just the latest in accidents concerning its oil operations. In the years before the Deepwater Horizon accident, BP had also suffered major accidents in its oil production fields in Texas and Alaska. Its CEO, Lord John Browne, had greatly expanded the company by buying off other oil companies and cutting costs. Unfortunately, Frontline’s report suggests the company's sole focus on expansion and cost reduction was what caused the fatalities of BP’s workers. BP started out as a small joint British Persian oil company in the 1970s. However, a revolution in Iran had cut off BP’s oil supply, cutting stock values and ultimately crippling the company. The 1980s and early 1990s were no better for the company, for it did not gain any new oil fields. It was then that a small board of managers attempted to revive the company. One of the new managers was John Browne. Young and energetic, Browne was a zealous cost cutter. His management style helped to partly revive the company and so, in 1995, Browne was elected CEO of BP by the management board. Now that the company was stabilizing, Browne focused on the company's growth. He needed to increase the stock value of his company, but his company lacked the assets to do so. By acquiring several major oil corporations, including Amoco and Arco, and incorporating their oil assets into BP, Browne had quadrupled the value of BP’s stocks. By the early twenty-first century, it seemed that Browne's aggressive cost-cutting and acquisition methods had saved and expanded BP. However, Browne’s management methods did not come without a heavy price. The first of a series of disasters happened on March 23, 2005, as a section of BP's Texas City Refinery exploded in a ball of fire. The explosion occurred in the isomerization unit of the refinery which was used to chemically boost the octane level of gasoline. By noon of that day, workers had accidentally overfilled the isomerization unit with flammable hydrocarbons fifteen times over. Since the gauges and alarms that were meant to prevent the hydrocarbons from overflowing were not working, the only emergency device left was to re-route the excess fluids to the blowdown drum. Unfortunately, the blowdown drum was rapidly filled, and without a flare to handle the oil, the hydrocarbons exploded in a flurry of gas and fire, killing fifteen workers. Despite the accidental nature of the explosion, it was no accident. The Texas City Refinery was in disrepair by the time BP had acquired it in 1999 from Amoco. Built in the 1930s, pipes and gauges of the old refinery were corroded. In addition, the technology used was outdated, for example, the blowdown drums. Today, modern flares do a much better job at handling excess fluids in emergencies as they burn excess oil off rather than store it. Despite corroded and dangerous infrastructure, BP never replaced it because of cost cuts Browne instituted after buying Amoco. This twenty-five percent cost cut prompted lower BP executives to cancel any proposed infrastructure improvements. This move proved deadly for BP, as demonstrated in the Texas City Refinery accident. However, Texas City was not the only disaster to affect BP. According to Frontline, on March 23, 2006, a pipeline at BP Prudhoe Bay in Alaska leaked 260,000 gallons of crude oil. The spill was the worst ever on the North Slope, creating large pools of oil all over the slope. Fortunately, it was winter and the cold weather had made it possible for workers to remove most of the spill. Browne himself visited the site a day later. After reviews made by BP's chief environmental advisers, Browne announced that the spill was an isolated incident. However, just...
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