GEMA 6360 – PRODUCTION OPERATIONS MANAGEMENT

“Critically assess the public relations and crisis management approach adopted by BP to the oil spill incident.”

 

EXECUTIVE SUMMARY

1. BP DISCOVERED OIL IN IRAN BEFORE WWI. IT IS ONE OF THE FIVE LARGEST OIL COMPANIES IN THE WORLD.2. HYUNDAI HEAVY INDUSTRIES BUILT THE DEEPWATER HORIZON, A SEMI-SUBMERSIBLE MOBILE OFFSHORE DRILLING UNIT IN 2001.3. IN APRIL 2010, METHANE GAS SHOT OUT OF THE DRILL COLUMN AND EXPLODED, RESULTING IN MILLIONS OF BARRELS BEING RELEASED.4. BP SHARES DECLINED AND THERE WERE PROTESTS FROM VARIOUS GROUPS. THE BRITISH ECONOMY WAS AFFECTED.5. BP NOW HAD THE RESPONSIBILITY OF CLEANING UP THE SPILL AND OF RELAYING THEIR SINCERITY TO THE PUBLIC.6. BP’S CRISIS MANAGEMENT AND PR WAS A FAILURE: THEY BELIED THE ACTUAL NUMBER OF BARRELS SPILLED, THEY DEFLECTED BLAME AND THEY DID NOT EMPATHIZE WITH THOSE ADVERSELY AFFECTED.

INTRODUCTION The DeepWater Horizon was a semi-submersible unit which

was supposed to have been operational in waters, up to 8,000 feet.

It was leased to BP from March 2008 to 2013. In April 2010, the explosion killed 11 and injured 17; and

was stopped on July 15, 2010. About 4.9 million barrels of crude were released. Fishing & tourism industries in the Gulf were hardest hit

and BP has been blamed by the US White House for cost-cutting and a lack of a system which would have ensured safety.

Journalists have been refused access to public areas and flying over the spill, although BP has stated that its policy is to allow as much access as possible.

The spill was described as “the worst environmental disaster” ever faced by the United States.

INTRODUCTION BP’s initial exploration plan stated, “It is unlikely that an

accidental spill would occur…no adverse activities are anticipated.”

By May 26, 2010, over 130 lawsuits had been filed against BP over the spill.

In September 2011, the final investigative report stated that the main cause of the explosion was a poor cement job and that Halliburtun, BP and Transocean were jointly responsible.

The first volume of the report states that there were numerous systems deficiencies, poor maintenance of electrical equipment that may have ignited the explosion, “bypassing of gas alarms and automatic shutdown systems that could prevent an explosion, and lack of training of personnel on when and how to shut down engines and disconnect the MODU from the well to avoid a gas explosion and mitigate the damage from an explosion and fire. These deficiencies indicate that Transocean’s failure to have an effective safety management system and instill a culture that emphasizes and ensures safety contributed to this disaster.

PROBLEM STATEMENT Explosion of the Deepwater

Horizon oil rig in the Gulf of Mexico on April, 20 2010, led to catastrophic problems resulting in millions of gallons of oil spilling into the Gulf, polluting the environment of coastal waters and coastlands surrounding the Gulf. This resulted in environmental organizations and public protests and the decline of British Petroleum shares. This crisis extended to the British Economy and developed into disaster for BP (British Petroleum) with respect to stopping the spill, cleaning up the environment and managing the public perception of the spill.

METHODOLOGY

Information and data collected for this research paper are extrapolated from the British Petroleum’s (BP) website, other internet search engines, text reviews and reading from journals relevant to the subject matter.

PURPOSE CONTEXT This research paper seeks to demonstrate the

researchers’ ability and understanding of how BP managed and demonstrated good business ethics and public relations during the 2010 oil spill crisis.

Since the onus was on BP to inform the public and the government’s regulating agency for the oil industry, BP’s incident had and will have far more reaching environmental negative effects on the environment and stakeholders. It was incumbent on BP to disseminate information on what efforts were to address the situation as to how the spill would be halted and how the company could enhance its business ethics.

LITERATURE REVIEW Crisis management is the process that implements strategies to

counteract the negative effects of an event that can damage the reputation of an organization.

The Journal of Management Studies states that crisis management originated in the 1980s with the handling of large-scale disasters.

Gonzalez-Herrero and Pratt created the 3 phases of the Crisis Management Model – detecting the early indicators of a crisis, creation of strategies to avoid an emergency situation and implementation of the change process and continuous monitoring.

Everett Rogers’ Diffusion of Innovation Theory supports the sharing of information during emergency situations. This process involves connection between 2 parties – a subject matter expert & a party without information.

Several theorists propose that contingency planning is a key success factor for an organization to be sufficiently prepared for dealing with crisis.

Tymson & Sherman highlight the media’s role in the response stage of the crisis communication theory. It makes the difference between successful and unsuccessful communication to the public.

PUBLIC RELATIONS AND CRISIS MANAGEMENT – SUCESSES AND

FAILURES

BP’s PR Department used official statements, press interviews & morning shows to manage the crisis.

SUCCESSES FAILURES

Communication via website was good. Maps tracking clean-up process and pictures were included.

Downplaying the damage hurt BP’s credibility and created a perception of dishonesty by the Company.

The use of social media and networks to communicate clean-up efforts was also commendable.

Deflecting blame by highlighting that the rig was owned by the contractor. They even offered their support!

Irresponsible remarks by the CEO, who stated, “There’s no one who wants their life back like I do,” exacerbated a lack of confidence in BP’s efforts to clean up the mess.

FINDINGS

DESCRIPTION OF HOW BP>>>>>>

IMPACT OF AN ACCIDENT SUCH AS THE DEEP WATER OIL SPILL CAN HAVE ON THE

CARIBBEAN REGION

Although the US suffered the brunt of the damage, some Western Caribbean countries feared the worst.

Such an oil spill can have horrendous effects on the Caribbean; marine resources, wildlife, tourism, natural habitats, fisheries & recreational activities are only some that can be hurt.

The loss of tourist revenue would destabilize the Region. Coral reefs, marine organisms & any species migrating to the

Caribbean Sea would be disrupted & potentially endangered. Fishing and the seafood industry would suffer, along with food

supply. Cruise ship routes would be altered drastically, resulting in huge

economic loss. The image of the Caribbean as idyllic and enchanting would be hurt,

perhaps permanently, or at least long enough to do irreparable damage.

RECOMMENDATIONS ON HOW BP COULD HAVE HANDLED THE PR CRISIS

It seems that BP was too slow to act in response to such a crisis, which perhaps revealed that there was no plan in place for such an occurrence. A comprehensive risk analysis should have been done.

The Company also failed to – or appeared not to – empathize with those affected.

BP should have taken ownership of the spill & issue frequent progress reports;

Transparency should have been of paramount importance – this would have built confidence and shown sincerity in their approach;

Control of photos – some of the pictures on the Web seemed generic;

Displaying empathy by making diligent and visible attempts to control the problem;

Immediately halting the efforts for environmental waivers.

LESSONS LEARNT…. Collaboration provides solutions and effect new capabilities. BP has now strengthened international, professional and

governmental relationships, which are all important as key stakeholders in their projects.

Reliable & timely information assists in better decision making and safer operations.

The urgency in containing the spill and dealing with its effects has driven innovation in technology, tools, equipment and processes.

Timelines have enabled the creation of a series of technological and technique developments.

The foundation has now been laid for future refinements as part of an enhanced regime for any type of offshore spill response.

CONCLUSION