"The oil spill is an ongoing assault on our nation, and it is one that is going to continue to take months, if not years, to resolve. But make no mistake: this disaster is not just about our coastlines. It’s a painful reminder that for years, we’ve failed to act with the sense of urgency that this challenge requires."- Former US President Obama
On April 20, 2010, the BP Deepwater Horizon oil rig, located in the Gulf of Mexico, experienced a catastrophic blowout, leading to the largest marine oil spill in history. The explosion killed 11 workers and released an estimated 4.9 million barrels of oil into the ocean over 87 days (about 3 months). This environmental disaster devastated marine and coastal ecosystems and the local economy reliant on fishing and tourism.
BP allegedly underestimated the spill's flow rate, reporting 1,000 to 5,000 barrels per day concealing the true scale of the disaster. Source info here.
The BP Deepwater Horizon oil spill disaster was not the result of a single failure but a complex interplay of mechanical failures, human errors, engineering design flaws, operational shortcomings, team coordination issues, and most importantly lack of risk management practices by BP’s third party.
This blog will focus on the importance of risk management practices and why organizations need to prioritize not only themselves but also their partner companies and along with that emphasize the importance of having a crisis management plan in place.
WHAT EXACTLY HAPPENED ON THAT DAY?
U.S. Secretary of the Interior Ken Salazar- "It appears that there was a cascade of failures, one leading to another."
Mark Bly, BP’s head of safety during the disaster, outlined key findings from the investigation into the disaster:
Cement Slurry Issues: The cement used to seal the well was weak and poorly designed, allowing hydrocarbons to escape.
Pressure Test Failure: Workers missed warning signs during a crucial pressure test, failing to identify problems.
Blowout Preventer Malfunction: Critical components of the blowout preventer, meant to seal the well in emergencies, were not working properly.
Note: A blowout preventer (BOP) is a critical safety device used in oil and gas drilling operations to prevent the uncontrolled release of hydrocarbons (oil and gas) from a well. It is typically installed on the wellhead, which is the top section of the well and consists of a series of high-pressure valves and sealing mechanisms.
Undetected Hydrocarbon Flow: The rig crew failed to notice hydrocarbons passing through the blowout preventer, leading to the explosion.
For detailed findings please click here
The above causes indicate a multi-level failure resulting in a disaster of this magnitude.
LACK OF RISK MANAGEMENT FOR THIRD PARTY VENDORS
Michael J. Mauboussin- "Good risk management fosters vigilance in times of calm and instills discipline in times of crisis."
A US Government safety panel post the accident concluded that BP applied less process safety standards to the rigs contracted out than its facilities.
The oil company failed to perform an effective comprehensive hazard evaluation of the major accident risks associated because BP's extensive risk evaluation program focused solely on BP assets, neglecting to include drilling rigs that were contracted out to other firms for operation. Source info here.
The disaster unfolded in the rig contracted to the third party and had a comprehensive risk assessment been done for the rigs under the third party, a disaster of this scale might not have happened.
LEGAL AND FINANCIAL IMPACT ON BP
BP’s financial settlement for the Gulf of Mexico oil spill is one of the largest in corporate history, with the company having already set aside $56.4 billion to cover the total bill. -Reuters (July 14, 2016)
BP faced significant backlash for its safety failures and inadequate risk management practices. The aftermath saw extensive cleanup efforts, legal battles, and regulatory changes aimed at preventing similar incidents.
The charges filed against BP for the Deepwater Horizon disaster include 11 felony counts (11 workers died in the blast), misdemeanours under the Clean Water Act and Migratory Bird Treaty Act, and an additional felony count for obstructing Congress. Most charges are linked to BP's mishandling of a critical pressure test on the rig. BP will pay $4 billion in total, including $1.256 billion in fines, over five years, and will also be on probation for five years. Additionally, $2.394 billion will go to the National Fish & Wildlife Foundation and $350 million to the National Academy of Sciences over five years. Source info here.
Under US law, companies convicted of certain criminal acts can be debarred from contracting with the federal government.
CRISIS MANAGEMENT LAPSES GALORE
Rick Outzen, publisher of the Independent News-"For a long time, we didn’t get any help from BP. It took them a while to take it seriously. They weren’t forthcoming with information, and it was very frustrating. People here were scared and angry."
Following were the key lapses in the crisis communication response:
1. Age of New Media:
BP's spill occurred in the world when media and social media were a phenomenon where negative news about the organization would not take much time to reach the masses.
In the age of media and social media, negative news can cause stock prices to fall and investors to be concerned.
Hence an effective plan is needed to be ready for a crisis response in any situation.
2. Integrity Issues
The incident has a huge negative impact on the marine population, especially on the fishing stocks near the shores. Instead of taking the blame, BP allegedly offered 5000 USD to fishermen to influence them not to sue the company. For more information, Click Here
The way the incident was dealt with reportedly brings out the lack of integrity among the employees and how the top management allowed such missteps in their response plan.
3. Avoiding Responsibility
When an organization tries to avoid responsibility, it is seen as running away from taking responsibility.
Statements like ‘this are not our fault; the safety equipment was not handled by BP and the exploded rig was owned by the third-party company’ contributed to the sentiment that BP was unwilling to take any responsibility.
4. Lacking Empathy
The then-BP CEO made a remark that showed his lack of empathy when he said that he wanted this to be over soon and wanted his life back.
The above statement showed an utter disregard for the people who were impacted due to the disaster.
These instances added to the list of what to avoid while executing a crisis response strategy. Lack of empathy never sits well with the public and can have catastrophic consequences for the organization. It is important to run through these scenarios and have an action plan in place.
CONCLUSION
In the end, this is not only about BP, but it can also happen to any organization. A crisis can happen to anyone, however important is how you deal with it and whether you have a crisis management plan in place to ensure that the situation does not go out of hand so that not only the people but the organization is safeguarded as well.
Secondly, it is critically important for organizations to mandate their third-party partners to have a risk management culture to protect their business. Had BP simply done this a disaster of this scale would not have happened.
Gorisco has a wide range of experts who are experienced in defining and designing various solutions to help organizations mitigate their risks and resolve their problems.
At Gorisco, our motto is 'Embedding Resilience,’ and we are committed to making the organizations and their workforce resilient. Reach out to us if you have any queries, clarifications, or need any support on your initiatives.
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