Bp case study analysis

Cause Immediate cause: excess gasoline spilled into a vent system which led to explosion after ignition. Sequence of events leading to the immediate cause: Lack of proper training of workforce. Liquid overflow from stack. Improper communication to top officials about disablement of alarms. Cause Immediate Cause: A corroded transit pipeline spilled 2,67, gallons of oil in early Sequence of events leading to the immediate cause: UT technology was used since instead of the PIG pipeline inspection gauge. Water was substituted for corrosion inhibiting chemicals since Corrosion in the transit pipeline Ineffective leak detection system.

No replacement of deficient systems Cause Immediate Cause: High pressure methane gas from well expanded into drilling riser and went to drilling rig and it caused an explosion. Sequence of events leading to immediate cause: Absence of blow out preventers Use of sub standard quality of cement for the wall of oil well Alarms had been overridden.

What Happened

All critical digital and analog drilling instruments were not calibrated Overdue maintenance jobs of 3, man-hours. Financial Impact OR???? Profits Site Alignment Two-way Communication 1 2 4 5 3 6 Problems raised by shop floor associates should be communicated to the higher levels at the latest. Neglecting Safety may give short term profits but finally leads to huge loss. Site Alignment is one of the best practices Cost cutting should not be at the cost of safety. You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later.

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lessons in probabilities

Visibility Others can see my Clipboard. BP had elected to use the cement, regardless of knowing the final test results and had, consequently, missed a risk trigger for another major threat. Of significance also, the probability of this risk occurring has now increased although BP is not aware of this. Regarding Risk 3 Exhibit 2 , BP had poured the cement and done a preliminary displacement test. Essentially, if the amount pumped into the well is equivalent to the amount pumped out, it is an indication that the cement plugs used to seal the well were holding up. However, a thorough evaluation would determine this conclusively.

Such an evaluation would have determined if there were channels in the cement thereby creating instability and whether the cement had bonded correctly. If errors were found, remedial action would be needed. Although the contracted Schlumberger team was ready and available to perform the evaluation test, BP decided there was no need to perform it based on the displacement test results. We now have seen another opportunity to detect a risk trigger results of the evaluation test disappear.

As we now know as reported in the National Commission Report , the cement job did not hold up. The result was a blowout. The BOP failed to operate and did not seal off the well. Flammable gas quickly overwhelmed the Deepwater Horizon rig and caught fire. Efforts by the Coast Guard to douse the flames were to no avail and the rig sank to the bottom of the ocean two days later.


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The well continued to release oil for another three months before BP finally purchased and installed a Capping Stock and built a relief well. Although BP's corporate culture was one of operating within a reactive environment with the hopes of keeping costs as low as possible, they are now learning that upfront spending i. BP was never oblivious to risk; their annual reports Annual Report , and Annual Report , , are proof that they're aware of the various threats in their line of work.

However, their intent on prioritizing costs and revenues above all else has, to them, been a gamble that they felt they could take on. Up until the Deepwater Horizon event, there had been no threat that, even if faced reactively, they couldn't absorb financially.

Epsilon | Case Study | BP

However, on April 20 th , , they pushed the gamble too far. Here are some of the costs that BP has since had to bear:.

We've shown a very significant example of the effect that an organization's culture has on the way in which it views risk through the context of BP's Macondo well project where the Deepwater Horizon rig suffered a blowout and subsequent explosion. The decision makers for the Macondo Well project did not adequately consider the impact of risks accepted with the specter of a late and over-budget program foremost on their minds.

We've reviewed three of such decisions and showed how these events could have been assessed and documented in a sample risk register along with recommended responses and contingency plans. A risk-seeking organization will often choose to accept risk rather than pay for preventative measures up front.

We've shown that among the factors that led BP to be risk-seekers included a deeply entrenched culture of valuing cost over quality, which was evidenced by a number of other costly accidents in the years prior to the Deepwater Horizon disaster. This culture, combined with past experience of suffering quite minimal financial repercussions in previous operational failures, along with the knowledge that there would be minimal independent oversight of operations in the Gulf, all contributed to their collective mindset. Finally, deep cash reserves made it easier to absorb and accept threat.

British Petroleum (Bp) Case Study Essay

It behooves the individual, particularly those entrusted with a critical project where lives, property, and our environment are at stake, to be aware of the potential stakeholder risk tolerance level—what might be known quite innocuously as Enterprise Environmental Factors—but are not to be underestimated.

It behooves this individual to be aware of these factors in such a situation and become an ambassador for effective risk management. Being cognizant of the culture puts the project manager in a better position to strategize and lobby for effective risk management. The cost for a reactive risk acceptance policy in the long run is far more expensive than the option of applying solid, proactive risk management practices. One hopes that the average project would not have as dramatic an outcome as the failed Macondo Well project, though the lesson can still be applied; there's a greater ROI on managing risk proactively, rather than reactively.

Nowhere is this case more evident than in this particular situation. Another lesson learned is that a poor response to a single risk event by itself may not necessarily amount to a large impact or increased probability to a future threat, but a succession of unheeded and unplanned-for risk events will.

After each risk event, all future risk events should be re-evaluated for probability and impact, and an appropriate response taken. This is even more critical for environments such as offshore oil drilling where the impacts of a poor decision can be catastrophic. Where the stakes are this high, the risk management processes should be all the greater.

Deepwater horizon

BP, Halliburton, and Transocean have paid dearly to learn this lesson—but none so dearly as the eleven men who lost their lives on April 20, Annual Report and Form F In Morningstar. Business: The wages of failure; BP and golden parachutes. The Economist , , 51— Ciura, B. The Motley Fool.

Cohen, M. Deepwater drilling: Law, policy, and economics of firm organization and safety. Vanderbilt Law Review , 64 6 , — Damodaran, A. Strategic risk taking: A framework for risk management. Fountain, H. Plan for relief wells spurs hope amid caution, The New York Times. Gold, R. Leaking oil well lacked safeguard device. The Wall Street Journal. Hagerty, C. Deepwater Horizon oil spill: Selected issues for Congress. Congressional Research Service Report for Congress.

Hillson, D. Understanding and managing risk attitude.

Much more than documents.

Huddleston, Jr. Jackson, R. The Ottawa Citizen, pp. Jennings, M. What BP teaches us about ethics, risk, and business management. Corporate Finance Review , 15 2 , 38— Lack of major losses boost BP captives. Manuele, F. Please note you might not have access to this content.

Case Study on Risk Management : British Petroleum BP Oil Spill

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