BP's Deepwater Oil Spill Case Study Analysis - Business Ethics

BUSINESS ETHICS CASE STUDY

THE GULF COAST AND THE BP OIL

SPILL

Group 9

1. Ngô Thị Xuân Hường 3. Nguyễn Thị Thùy Dung

2. Trần Thị Thanh Tú 4. Thái Mạnh Cường

OUTLINE

CONTEXT OF THE CASE STUDY

DILEMAS FOR THE ISSUE

THEORIES AND ARGUMENTS

RECOMMENDATIONS

CONTEXT OF THE CASE STUDY

1. CONTEXT OF THE CASE STUDY

1.1. Background of BP Oil and Gas Group

• Founded in 1908• Bristish Petroleum• Headquarter: UK• 2010 - 2nd largest

oil company in the world

• More than 92,000 employees

BP’s Products


1.1. Background of BP Oil and Gas Group


Deepwater Horizon- owned and operated by

offshore-oil-drilling company Transocean and leased by oil company BP

- situated in the Macondo oil well in the Mississipi Canyon

1.2. Disaster Deepwater Horizon


Deepwater Horizon oil spill (BP oil spill)

- Occurred in 20/4/2010- Crude oil spilled into the ocean through 3 major cracks



Gulf of Mexico





Already, this oil spill is the worst environmental disaster America has ever faced. And unlike an earthquake or a hurricane, it's not a single event that does its damage in a matter of minutes or days. The millions of gallons of oil that have spilled into the Gulf of Mexico are more like an epidemic, one that we will be fighting for months and even years.

“

”



Apr. 29, 2010: Louisiana Gov. Bobby Jindal declared a state of emergency

today because of the spill

Apr. 30, 2010: Floria’s Governor Crist issued the first state of emergency following the Deepwater Horizon oil spill crisis.


• BBC News, 2013, BP: Gulf of Mexico oil spill “shared responsibility”• BBC News, 2011, BP oil spill: The environmental impact one

year on• National Graphic, Gulf Oil Spill• New York Times, 2011, BP Shortcuts Led to Gulf Oil Spill, Report Says• New York Times, 2010, Tracking the Oil Spill in the Gulf• Wikipedia, Deepwater Horizon Oil Spill• Vietnamplus, 2010, Công bố nguyên nhân vụ tràn dầu vịnh Mexico

1.3. Source of information

DILEMMA FORTHE ISSUE

2. DILEMMA FOR THE ISSUE

• How would BP react to

the oil spill?

• Decision makers: BP’s

Board of Management.

2.1. Ethical issue

CONFLICT OF INTEREST

*Conflict of interests:

In Causes of Deepwater horizon oil spill

PRODUCTION

PROFITS PROTECTION

SAFETY


2.1. Ethical issue

PERSONEL, EQUIPTMENT, NATURAL RESOURCES AND THE ENVIRONMENT


- violate 7 federal

regulations at that time

- only one cement barrier- ignorance of negative tests,

limitations of control machines

- no or little training about the rare dangerous case- failure to observe and respond to critical indicators- inadequate well control response- insufficient emergency bridge response

- no precaution for em-ployees or state regulators

- lack of compliance to safety standards or

accepted industry practice- failure to take timely and

aggressive well-control actions

2.1. Ethical issue

Causes of Oil Spill

Failure to notify federal regulators of changes in drilling plans.

Conscious disre-

gard of known riskViolation of la

w

Poo

r m

anag

emen

t,

lack

of k

now

ledg

e D

eviation from the

standard of care

No notification of changing

2. DILEMA FOR THE ISSUE

*Conflict of interests

Reaction to the disaster

2.1. Ethical issue

PROFITBENEFIT OF DIRECTORS v

s

COMPENSATION/LOSSES OF THE AFFECTED COMMUNITIES

CLEANUP COST/DITERIORA-TION OF ENVIRONMENT, ECOSYSTEMS

IMAGE OF THE COMPANY

RELEVENT INFORMATION


Available relevant information - Facts

Tourism and fishing industry forced to stop. Residents’ life seriously affected. Substantial damage to environment.

2

1 The worst oil spill in the history

Key stakeholders: employees, gulf/coastal residents, environment (water, animals), stockholders, govern-ment

3

Clear causes not available => BP believed that they were just merely negligent4

2.1. Ethical issue


Available relevant information

Estimation of government authorities

deep underwater plumes of dis-solved oil and gas would likely re-main confined to the northern Gulf of Mexico

68,000 square miles of di-rect impact by leaked oil (SkyTruth)

491 miles (790 km) of coastline in Louisiana, Mis-sissippi, Alabama and Flor-ida might be contaminated by oil (Bloomberge)

4.2m barrels – 176m gal-lons

(666m liters) spilled (Guardian)

62,000 barrels per day en-tered

the Gulf waters while BP esti-mates were only 1,000 –

5,000 barrels per day (BBC, NYT)

2.1. Ethical issue


Tracking the oil spill

New York Times


Naturally seeping oil in the ocean.

Woods Hole Oceano-graphic Institution


Claims arising from the spill

Fines from government

Cost to clean up the water, treat the oil in the deep and middle water, upgrade the quality of the environment

Badly damaged reputation

Cancellation or Loss of contract in the future

Available relevant information

Expected Consequences

2.1. Ethical issue

STAKEHOLDERS


STAKEHOLD-ERS

Environ-ment

Govern-ment

Residents

Company BPInvestor

2.1. Ethical issue

Employees


• PAHs indicators were 40 times more than before => reduce ma-rine oxygen levels => create “dead zones”

Stakeholder

ENVIRONMENT2.1. Ethical issue

• Heart and other organs would be

expected to be fatal or at least life-shortening

• Oil was found in many animals

=> matuted fish (change of the nucleotide sequence of the genome)


• Dead dolphins, dead birds, dead tur-tles, dead fish

• Death of a Gulf coral community• Tar balls found along the coast,

coastal islands, marshes (where rivers enter the ocean) => death of tree and marsh grass (National Graphic, The Atlantic)

• Oil fell to the ocean floor => remain in the food chain for the long term

Stakeholder

ENVIRONMENT2.1. Ethical issue


• 11 employees dead• 108 workers affected by the toxic from oil and dispersant (to sepa-

rate oil into droplets) in the clean-up effort

Stakeholder

EMPLOYEES2.1. Ethical issue


• physical health symptoms among their children who lived in less than 10 miles from the coastline (NOAA)

• commercial and recreational fish-ing in affected federal waters is closed (225,290 km2) (NOAA)

• fish, crab and other animals found dead => decrease in the quan-tity => fishermen got much smaller amount of fish

Stakeholder

RESIDENTS2.1. Ethical issue


• seafood from the Gulf is not trusted by consumers though samples passed the test of contamination

• many of the Gulf fisheries have col-lapsed => it is very hard to recover

• many people canceled their trip due to the spills => much lower revenue despite lower hotel rates, free service, changed cancellation policy from the hotels

Stakeholder



• the real estate prices and a number of transactions in the Gulf of Mexico area decreased signifi-cantly

• many people lost jobs and wages after the spill

Stakeholder



• the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs

• badly damaged image• BP's stock fell by 52% in 50 days on

the New York Stock Exchange• 10 – 40% drop on sales

Stakeholder

BP COMPANY2.1. Ethical issue


• Investors saw their holdings in BP shrink to $27.02, a nearly 54% loss of value in 2010 (New York Post)

Stakeholder

INVESTORS2.1. Ethical issue


• 3 years to investigate and then rule the case Deepwater Ho-rion oil spill

• Ban of offshore drilling in state waters• Law amendment

Stakeholder

GOVERNMENT2.1. Ethical issue

SUGGESTED SOLUTIONS


Solution 1

BP might consider the oil spill was only an accident, prove a

gross negligence in the case and refuse the re-sponsibility for compensation and cost to clean up waters and recover the ecosystem

2.1. Suggested solution to react the oil blowout


It is not our fault. The wrong

thing is our heavy cost-cut-

ting


Solution 2

BP might not admit their faults and shift the blame to other parties. The company could conduct some methods to collect and dissolve only the surface oil and pledge to compensate the affected people with the view to show their CSR and improve the image of company. Then they can cook the report relating to the environmental issue to reduce the impact of the oil spill to undermine the claims and avoid paying compensation.


Not our fault.

Transocean messed

up.

It is Hal-liburtons’

fault.




Solution 3The BP should react immediately by working with the officials to seek effective methods to collect the spilled oil, close the oil well and reduce the impact of the oil in the column of water on the surround-ing ecosystem. Doing research to develop method for ocean life recovery should be included in the long-term plan to improve the water quality affected by the accident. In addition, the company should build a channel to receive all the claims of the resident, verify and make full payment for those really affected. In the long term, moreover, the company should support the residents living along the coastline in advertising the safe seafood and promoting the tourism.


THEORIES AND ARGUMENTS

3. THEORIES AND ARGUMENTS

3.1. Utilitarianism- “The greatest good for the greatest number.”- “The most good” & “The least harm”.

Analysis for 3 solutions:- S1 and S2: BP and other companies ignored their responsibilities,

it was an accident.Þ violates this theory because they were irresponsible for the

consequences of their actions.- S2 is better when BP did a little effort to resolve the visible prob-

lems. However, it is only the tip of iceberg.


3.1. Utilitarianism Analysis for 3 solutions:- S3 is the best one because:

solve environmental issues immediately => minimize the nega-tive impacts for environment and local resident.

treat affected people well => reduce the sadness, suffering and economic losses of people; give chances for their future careers

have the suitable improvement for the sea and surrounded envi-ronment, for local tourism and the company itself in the long term=> sustainable development


3.2. Kant’s theoryLet’s consider 2 most important groups of stakeholders BP and related companies: have their own rights to do business

legally, gain profits and protect themselves from negative impacts- S1: ignore their responsibilities, it was an accidents.- S2: force them to pay a certain amount of money to resolve the

problem immediately but it could bring a good image for com-panies because people think that they do CSR well.

Þ this action could protect companies.- S3: the most costly and might lead companies to a difficult time. - cannot protect the rights mentioned above


3.2. Kant’s theory Affected people (have rights to live in a clean environment, work in safe

working condition, and take advantages of natural environment to make profits)

- S1: can not protect their rights - S2: do for short term but in the long term, when the environment is

destroyed seriously, those people will lose their rights for living and working.

- S3: protect their rights Þ conflict between the rights of BP and the rights of affected people.


3.2. Kant’s theory• According to the formula of humanity as end, a business organiza-

tion and their actions should be arranged so that they contribute to the development of human.

Þ the rights of people who are affected should be taken the priority.• the first formulation of the categorical imperative – that of making a

maxim into a universal law. This would forbid much of the exploita-tion and pollution of the natural world, and required recovery and improvement after harming environment

⇒ the third solution is the most moral one

RECOMMENDATIONS

4. RECOMMENDATIONS

4.1. Short-term

• Collecting the spilled oil as soon as possible

• Asking experts to give the best solution.

• Ensure that BP would take responsibility for the consequences

• Give the full infor-mation about the spill

• Accept the inspection from the government

4. RECOMMENDATIONS

• Ensure that the company would recover from this disaster as soon as

possible.

• Compensate by money and im-prove their fam-ily’s spirits.

• Create a group of staff to solve the problems.

• Continue to do business

4.1. Short-term

Find out and sign new contracts.Do business to help BP escape

from the issue as soon as possible

Introduce them to new jobs Recover promotion for

tourism.

Pay fully finesEnhance the secu-

rity system

Recover and Im-prove the ecosystem

Environment

Resident

Sto

ckhold

ers

Government

Plans

Employe

es Test and enhance the system and standards for safety

BP itself

Give training coursesGive the full safety

facilities in working

4.1. Long-term

4. RECOMMENDATIONS

THANK YOU FOR YOUR ATTENTION