Strategic Framework in BP-Deepwater Horizon Accident One Essay

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Strategic Framework in BP-Deepwater horizon accident

One of the most eminent names in the oil and gas industry is British Petroleum, considered as the largest provider of oil and gas to its customers for transportation, energy for heating and light and retail services for petrochemical products globally. The financial and operational picture of the company's performance is illustrated in table1 below.

Performance at a glance for 2010

Facts and figures

Sales and other operating revenues

Replacement cost profit

Number of employees

Proved reserves

Retail sites

Upstream

Refineries (wholly or partly owned)

Refining throughput

$297,107 million (year 2010)

($4,519) million (year 2010)

79,700 (at 31 Dec 2010)

18,071 million barrels of oil equivalent

22,100

Active in 29 countries

16

2,426 thousand barrels per day (year 2010)

(BP's Corporate website, 2010)

On 20th April 2010 the company faced a serious challenge when one of its oil rigs started leaking and simply couldn't be stopped. With Deepwater Horizon accident, BP's image suffered a lot and many urged the management to change its future strategy for tackling crisis and managing public relations. The accident was result of gas release resulting in the explosion of an oil rig on the Macondo exploration well in the Gulf of Mexico. The intensity of the accident was such that flames continued for 36 hours before the rig sank. The environmental hazards that resulted from this were primarily due to the leakage of hydrocarbons into the Gulf of Mexico for 87 days before the well was practically closed and sealed. The management committee reported that the accident had occurred due to the loss of control on the pressure in the well. This had resulted in the well bursting caused by failure of the preventer which was especially designed to maintain a consistent condition. The misery didn't end there, the blown-out preventer's emergency function also failed to seal the well that caused the leakage to occur. In this accident eleven people died and many others were injured. Great loss was suffered by the environment and the surrounding communities. The company took the responsibility to clean-up and compensate people those who had been affected by the accident and assured to look after their health, safety and welfare by spending $17.7 billion in restoring measurement action plan. The company had devoted to sincerely work with government, local residents, shareholders, stakeholders, industry and media in their act of social responsibility.

Beside the lesson the company learned from the Deepwater Horizon accident, it has had laid serious implication on the strategic outlook of the company before the incident, BP's response to the oil spill crisis management, strategic framework after the accident and the future of the company. All these issues have raised concerns from media, investors, stakeholders and social and environmental activist. In this case company needs to develop a strategy that addresses the issues of all and restores the company's image as a socially responsible one that seeks to maintain healthy and cleaner environment.

BP's Strategic framework before accident

BP's journey began in 1909 when William D'Arcy and his team were successful in exploring oil from Persia and laid the foundation of BP. The BP brand logo was first designed by A.R Saunders from company's purchasing department in 1920 by winning an employee competition. With few variations in its contour, the logo represented BP brand for the next 80 years. BP celebrates its centenary in 2009 with events and publications marking hundred years of adventure, achievement and discovery. It started off as an oil company in 1909 and became a global energy group by 2010. BP's strong historical background and organizational cultural heritage had allowed it to achieve the pinnacle of success with firm adherence to the corporate goals and mission. Business ethics is defined in terms of the principles of conduct within organization that guides decision making behavior. Strategists are now more concerned that high ethical principles in the organization are maintained and practiced. All strategy formulation, implementation and evaluation decision have ethical implications. The Natural Environmental Perspective has shown that organizations are increasingly more concerned about the protection and maintenance of the natural environment for this reason they are joining environmental groups. Harming the natural environment is unethical, illegal and costly, this fact is also realized by BP and in response to this, the company has well established environmental, safety and public relations strategies.

Environmental Friendly Operation Strategic Framework

BP has committed itself to the eco-friendly business operations and in doing so it has adopted number of measures and has been associated with number of agencies working for the protection of environment. The product life cycle approach is on the way through which it maintains environmental friendly approach in the entire business operation. In their approach to remain environment-friendly throughout project life cycle, the company works to understand and manage the sensitivity of the environment in which it operates and holds itself responsible to it from the beginning to the end. The operation team has structured operating guidelines which are necessary in minimizing the adverse impact on the environment whether in marine, territory, aerial or wildlife form. These guidelines are focused on identifying and assessing potential environmental impacts in the strategic planning and project implementation phase, formulate appropriate measures to mitigate adverse impacts in the project operation and close monitoring and controlling of the environment even after the project has finished. BP's all monitoring sites have been certified by international environment management system standard ISO 14001.

BP is also working for the protection of flora, fauna and local species. In their approach to protect biodiversity, it has been inbuilt in the pre-access stage of the project life cycle and is an integral part of the project screening process. The impact assessment information is then further supported by the stakeholders' and shareholders' information which is then utilized in identifying opportunities and mitigate the risk factors on the biodiversity to have secure project functioning.

BP has established strategic alliance with international agencies in their effort to protect biodiversity and example of this is their support to the World Conservation Monitoring Centre (WCMC) which is a specialized body in biodiversity information and assessment center of the United Nations Environment Programme (UNEP). BP is also working with the Garadagh Cement Plant (GCP) in Azerbaijan to protect native species and BP is also working with Conoco Phillips and ExxonMobil to diminish interaction between bears and people.

Safety Measures Strategic Framework

BP's safety management has always been under attack and the company is trying to strengthen its safety measures in all the business operations. Various cases have shown that company safety measures and policies are in experimental stages and they have had bad effects whenever an accident occurred. Strategically company applies group-based operating management system that works rigorously for the safety, risk management and operational integrity of the company. The operational management system (OMS) works for the health, safety, security, environmental and operational reliability and compliance also for the maintenance, contractor relations and organizational learning integrated in the system across country.

To have safety measures assessment, the whole process is audited by the audit team working independently and assessing the operation site. The audit team prepares reports on quarterly basis and highlights any risk element or issues to the management in their quarterly report. BP has developed a performance management system that is based on rewarding the safe operations. Performance management system thus supports creation of an organization culture that is built on the objectives of safety, responsibility, sustainability and better future. In this system employees are evaluated on personal attributes of safety, compliance and risk management; effective teamwork, skills development, following the standards and operating procedures and lastly contribution towards the annual goals and BP's long-term strategic framework.

Social Responsibility Strategic Framework

BP has an international presence with its operations spread in almost eighty countries worldwide. In this global operation environment BP understands its impact on local communities and economies. BP is trying to maintain a socio-economic outlook by adopting investment strategies that benefit the local communities and BP. The business operations have benefit the local communities through creating more jobs in the economy, generating tax revenues and widening the business horizon of the local suppliers.

When the oil and gas company partners with the local authorities in the supply chain management it reduces cost, increased local and national commitment to the project and builds stronger relation with other businesses and government bodies that benefit the local investors as well as other stakeholders in the local community. With the strategy of localization and close cooperation with the government, the company can take care of its stakeholders and investors on a large scale. Establishing programs like business building skills, contributing toward the educational development and other community needs, sharing technical expertise with national and local government and making investment in the community programs have been part of BP's social development program targeted at the local and national authorities.

However it is not enough to have a code of ethics, documents for operating procedures and social development plans…[continue]

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