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British Petroleum Company’s Crisis Management Case Case Study


Executive Summary

This paper reveals the case study that focuses on the explosion which happened on the Deepwater Horizon seven years ago. It was claimed to be one of the greatest disasters that led to human deaths and oil spills that affected the ecosystem adversely. Professionals argued whether the fact that British Petroleum failed to ensure safety and appropriate crisis management was the main reason for the accident. This view is analyzed in the addressed in the paper. It is also discussed how the company could have responded to the explosion and why.

Problem Statement

One of the most critical oil spill disasters related to the petroleum industry took place in April seven years ago. It occurred on a drilling rig owned by the largest company that operates within oilfield services and deals with offshore drilling, Transocean Ltd. The explosion on the Deepwater Horizon led to eleven deaths and oil leaks, resulting in enormous damages not only to human lives but also to the environment, economy, and tourism. As a consequence, British Petroleum (BP) had to deal with the biggest oil spill and financial losses at the same time. What is more, its reputation was negatively affected. Even though the company couldn’t predict the explosion and prevent it, proper behavior in the framework of crisis management could have had positive influences on the observed outcomes (Ingersoll et al. 2).

BP spends much effort trying to overcome issues related to reputation damage. Still, it is only one of the consequences of the main problem. To improve the situation, the company started up a communication machine, but experts questioned its effectiveness. Thus, professionals wondered whether BP maintained crisis management properly or failed to do it. In this way, the problem was what BP should have done to enhance its crisis management and communication. Even though the company had other issues as well, this one turned out to be the most critical because it affected almost all the company’s operations directly or indirectly. It influences the company’s income, the source of competitive advantage, customer satisfaction and loyalty, the morale of employees, and strategic directions. In addition to that, it is connected with the way BP could have improved its performance and repair reputation to overcome financial losses and become competitive again.

Data Analysis

BP had experienced crises before the explosion that happened in 2010. For example, Wolf and Mejri emphasize the fact that it neglected safety several times (51). For example, in the middle of the 20th century, one of the oil rigs that belonged to BP collapsed, and more than ten people died. In 2005, a similar situation repeated and fifteen employees died in the fire while more than 150 of them were injured. Back then, the organization was charged, but recent events showed that it did not start paying expected attention to safety.

The oil spill was caused by the gas explosion. The very disaster started can be traced back to April 19 when the well reached more than 12,000 ft below the seafloor. The company used 51 barrels of cement, but this number was not enough to ensure a required seal. During drilling, mud was lost to the reservoir as expected but then it was pumped into tanks. However, seawater was lighter than mud and that there was not enough cement to balance the flow of gas, so it went in the drilling fluid. There are almost no doubts that the supervisors were aware of this situation, as the photo reveals that a diverter line was affected (see Exh. 1). The volume of mud continued to increase, and the recorder failed to reveal the data appropriately. However, professionals did not stop pumping at that time. When they did, the pit volume decreased at first, but it remained the same the next time and even continued to increase. The extreme pressure led to the blowout, the gas shot the water out and exploded.

This situation reveals that BP did not make the required emphasis on the value of safety when training its personnel. It was more critical for the supervisors to fulfill the task they had instead of implementing measures needed to avoid possible danger. BP’s response to the crisis is not efficient.

In this way, it is also possible to claim that the population that was greatly affected by this accident included those workers who performed their duties on the Deepwater Horizon. In addition to that, the management team was affected because it had to deal with the consequences of the explosion. It was critical to resolving problems connected with organizational performance. The families of those who died that day were also influenced by the disaster because they lost a person who supported them. The company’s partners could have become less willing to cooperate with it because of the possibility to be negatively affected by BP’s reputation. Even the representatives of the general public had to reconsider their attitudes and loyalty.

To improve the situation, BP followed the decision of the federal government. It got engaged in the clean-up and paid attention to those people who were affected by the disaster itself or its indirect influences. The organization focused on health, safety, and welfare. It was involved in the economic recovery of those industries that were affected by the oil spill, including tourism and seafood (Ernst and Young).

In the framework of crisis management and communication, the organization faced a range of difficulties because its personnel did not know how to cope with issues that occur while operating. The company and its management team did not provide any guidance that can be used when facing an ethical issue and trying to decide whether to continue performing to fulfill the most critical goals or to focus on how potential disaster can be avoided. What is more, BP had an opportunity to resort to its previous experiences and to develop a plan that can be used to prevent the next possible crisis. In this way, BP also had a chance to avoid additional expenses. However, being responsible for numerous issues, the company had to pay more than $5 billion in 2010 and provide more than $50 million to health organizations (Wolf and Mejri 80).

There were different ways in which the problem could have been addressed. The company could have reacted to the disaster, and its consequences ignored it, or claim it to be not a BP’s mistake. Still, it would have been advantageous if the organization developed a crisis management plan for its employees to follow in any situation that might affect safety anyway.

Key Decision Criteria

Trying to identify which alternative to following, BP should have thought of the way each of them dealt with the issues observed by the organization. Thus, attention should have been paid to the possibility to restore the reputation and enhance financial performance. All in all, it can be presupposed that it would have been better for the company to respond to the disaster immediately because in this way it could have improved the situation better than other options.

Alternatives Analysis

BP could have reacted to the oil blowout, claiming that it was an accident. The organization could have tried to make its stakeholders believe that there had been no sights of an issue that might have led to the explosion. In this way, BP could have made others believe in its innocence and ensured that it had done its best while operating. As a result, the company would have lost a relatively small part of its clients. However, some partners and customers might start thinking that BP is not experienced enough and that its performance is poor so that it is better not to cooperate with it. Still, proving gross negligence, the organization had an opportunity to avoid expenditures connected with the necessity to support the ecosystem.

BP might have tried to claim that the disaster happened because of other parties. If it had conducted some research to collect information that can prove at least some errors made by other organizations, BP would have been able to make them compensate the affected people. In this way, the company would not only save its money but also improve its reputation, attracting clients back. Still, this option would have entailed a range of ethical issues.

Finally, BP could have resorted to the third alternative. It could have reacted to the explosion immediately, accepting its fault for the inability to ensure safety. The company should have interacted with other professionals to develop a range of initiatives that were likely to reduce negative influences provided on the ecosystem. They should have maintained research and developed a long-term plan to enhance the environment and provide full payment for those people who were affected. In addition to that, BP should have focused on the possibility to advertise seafood and tourism industries that were negatively affected by the explosion. All in all, this initiative could have been the most appropriate one because it addressed all critical issues and avoided ethical dilemmas.

Recommendations

To respond to disasters appropriately, BP needs to develop a working crisis management plan that can be resorted to by the staff members who face critical situations. Considering the discussed case, the organization should create an infrastructure that can be utilized to deal with possible leaks. It should be based on deep-sea oil wells that are used by BP. With the help of the absorbent wall, the company is likely to prevent further issues of this kind.

It will be a great advantage for BP to gather an emergency response team. This group of professionals should patrol that wall and ensure its efficiency. Needless to say, that such a team is to contain well-experienced professionals who have all required theoretical knowledge and skills that can be used in practice.

In the framework of crisis communication, the company should pay much attention to its stakeholders. Transparency should be discussed as a tool to attract clients and restore their loyalty. BP should take responsibility for all those issues that occurred due to the mistakes it made and the inability to ensure safety. Even sincere apologies may be enough to improve the situation greatly. In this way, the company should hire a spokesperson who can easily get in touch with numerous clients.

The company should also reconsider the use of social media because it has already proved to be a great type of communication that can be approached without any significant issues. Unlike a personal website, social media allows the company to avoid constant reconsideration of the discussed disaster, and negative feedback regarding it is also likely to be reduced in this way.

Finally, the organization may consider the possibility to develop some kind of disaster website so that if some crisis occurs, professionals have an opportunity to reach it and inform the population regarding the possibility of crises (McMasters).

Action and Implementation Plan

  • To implement changes, following the results of data analysis, it can be claimed that BP should have done the following:
  • Collect the oil that was spilled during the disaster;
  • Address experts in the sphere to develop the most advantageous solution initiatives;
  • Point out the way BP would respond to the consequences;
  • Establish trust-based relations with stakeholders, sharing information about the accident;
  • Cooperate with the government to minimalize negative influences on other industries;
  • Provide compensations to families of those employees who died;
  • Gather a group of professionals to focus on such issues;
  • Improve safety standards;
  • Provide training;
  • Enhance security system;
  • Promote tourism;
  • Develop initiatives to improve the ecosystem.

Exhibits

Exh. 1: A Gas Flare Coming from a Diverter Line (Aeberman).

A Gas Flare Coming from a Diverter Line

Works Cited

Aeberman. The Oil Drum, 2010, Web.

Ernst and Young. “Deepwater Horizon Accident and Response.” BP, 2014, Web.

Ingersoll, Christina, et al. , 2012, Web.

McMasters, Michael. “Analysis of Situation/Background.” LinkedIn, 2015, Web.

Mejri, Mohamed, and Mohamed Mejri. “Crisis Management: Lessons Learnt from the BP Deepwater Horizon Spill Oil.” Business Management and Strategy, vol. 4, no. 2, pp. 67-90.

Wolf, Daniel, and Mohamed Mejri. “Crisis Communication Failures: The BP Case Study.” Management Journal, vol. 2, no. 2, pp. 48-56.

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IvyPanda. (2020, November 16). British Petroleum Company's Crisis Management Case. Retrieved from https://ivypanda.com/essays/british-petroleum-companys-crisis-management-case/

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