BP's Continuing Safety Problems: The Gulf of Mexico Crisis

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Case Details:

Case Code : BECG116
Case Length : 19 Pages
Period : 2005-2010
Organization : BP
Pub Date : 2010
Teaching Note : Not Available
Countries : India
Industry : Petroleum

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Yet another Disaster at BP Contd...

Experts said by the third week of June 2010, the volume of the spill would probably exceed the Exxon Valdez spill in Alaska⁵.

Considered to be one of the worst environmental catastrophes in American history, the incident once again called into question the credibility of the safety systems at BP. The company, which was responsible for some of the worst oil and gas tragedies in the US, was criticized for its lack of commitment to overall safety in its business operations. BP had been convicted three times of environmental disasters. These included two felonies and the company remained on probation in Alaska and Texas. Industry analysts said that despite its promises to reform, BP continued to remain complacent and to overlook safety aspects in its operations.

Headquartered in London, BP was founded by William Knox D'Arcy in 1908 in the Middle East. It was called the Anglo-Iranian Oil Company (AIOC) before it became British Petroleum in 1954. In 1998, it was named BP Amoco after merging with Amoco Oil Corporation⁶ (Amoco). In 2000, it was renamed BP. As of 2010, the company had three major business segments which included Exploration and Production; Refining and Marketing; and Gas, Power, and Renewables. For the year ended December 2009, the company reported total revenues of US$ 246.14 billion.⁷...

Excerpts >>

5] The Exxon Valdez oil spill was the most devastating environmental disaster to occur at sea. On March 24, 1989, the oil tanker Exxon Valdez spilled its contents into the sea, affecting 1,900 km of the Alaskan coastline. About 30 million US gallons (1US gallon = 3.785 liters) of crude oil were spilled, affecting the marine ecology as well as the lives of Alaskan fishermen. Exxon spent some US$2 billion cleaning up the spill, and a further US$1 billion to settle civil and criminal charges related to the case. In 1994, an Anchorage jury awarded the fishermen and affected communities US$5 billion in punitive damages. Exxon appealed against the ruling, claiming that the amount was excessive and unjustified. On December 2002, the damages were reduced to US$4 billion. In June 2008, the Supreme Court reduced the fine further from US $4 billion to US $500 million. As of 2008, Exxon Mobil paid US$ 3.4 billion in fines, penalties, cleanup costs, claims, and other expenses resulting from the oil spill.

6] Amoco Oil Corporation was a global oil and gasoline conglomerate founded in 1889 by John Rockefeller. The company was initially incorporated as Standard Oil of Indiana which was formed from the break-up of Standard Oil Co.

7] BP Annual Report and Accounts 2009.

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