Deepwater Horizon Case Study

1.  The Deepwater Horizon disaster occurred due to multiple reasons. The primary three that are suspected are due to the failure were the well casing, number of centralizers used, and decision not to perform a cement bong log. Although those are considered main contributors, there were failures seen from every level; starting at the individual level and all through the industry as seen below.

Individual	Team	Corporate	Industry
Disabled the emergency gas alarms so that people could sleep at night	Under budget estimations of initial costs	Performance oriented vs safety oriented	Audit found 390 failures on rig but did not hold BP accountable
	11 different companies used to construct casing	Lack of safety in 18 core values	Did not establish set safety regulations that called for constant status updates
	Did not check integrity of cement	Too cost conscious
		Numerous signatures needed to make change

2.   The lack of BP leaders to side on caution was a common theme that lead to the Deepwater Horizon disaster. They originally under budgeted the project and therefore all of the time and money for safety was disregarded in order to make up for the immediate loss. They used the cheaper and less safe casing, did not repair the 390 failed components from an audit, and ignored science which proved the cement cap to be misaligned due to the extra money for repairs. The executives also did not have experience to start the project. The most tenured executive was three months. This lead to rash decisions to ignore the more expensive safety precautions for the need of immediate results. The industry also lead to the failure. There was an audit done in which they found 390 failures on the brig that needed immediate repairs. The auditors did not follow-up and did not hold BP accountable. The rig was never turned off and the repairs were never completed.

3.   The ability to voice opinions were weak and inefficient. The ethical values were there and the science backed their concerns, but they did not voice their opinions appropriately. There were long e-mail chains between the individuals with concerns and BP executives. This is inefficient as e-mails may be interpreted incorrectly, such as targeting the executives. It also does not allow the individual to have the emotional impact as an in person meeting would. BP also used a decision tree that only they created. This means that there could have been vital decisions in the tree that were missing, but with only one group creating it, there was no input. Once the tree was reviewed in court it was proven that there could have been other cement capping safety options included in the tree.

  

4.   Linear casing involves hanging a steel tube from a liner hanger with a tube already in the well than inserting another tube on top of the prior one. This provides 4 barriers of protection against leaks. Long string casing involves a single string of steel casing from the seafloor to the bottom of the well. This provides 2 barriers and does take less time to install.

The main argument between the two was safety versus money and time. Linear casing is safer but will take more time to complete and will cost more money. Since BP was already behind schedule and running a much larger deficit than planned, they bypassed the safety for the long string casing. The estimated time saved was three days and the savings in cost was estimated to be approximately $7-$10 million. In the overall holistic viewpoint, this is a very small amount. BP was already spending over $500 million per day on the construction so the $7-$10 million in savings is minor.

5.   From this analysis, BP and the industry had ineffective organization. It originally took about eleven executive signatures to get any new process approved. This long process would drag out any safety decision. The short tenure of the executives in charge of the project lead them to be nearsighted. They looked at short term set-up costs and deficits versus the long-term gains from the additional safety investments. The industry also failed by not holding BP accountable for their failed audits. They also did not screen any of the project during the life the project.

6.   The Deepwater Horizon disaster could have been mitigated if they aired on the side of caution. The simulations and science behind the cement not being flush was ignored which caused the explosion. BP executives ignored the warnings because it would cost more time to repair the current issue. They also decided to save three days by choosing long string casing over linear casing. These unethical decisions can be traced to BP’s organizational structure. They were focused on results and product versus safety. In fact, of their 16 core business values, not a single one had to deal directly with safety. Also, each project was run by different executives who often competed with each other. This resulted in executives often not sharing best practices with each other.

7.   The BP executives, focused on cost reduction and performance, often dismissed safety regards. They called the cement bong log test not a quantifiable test and the need for it was not necessary in practical use. The rash decisions can be traced to multiple issues with the project. The project with under budgeted which resulted in immediate deficits. This put pressure on the new executives to cut costs to mitigate their immediate losses. This then caused them to be more close minded and only considering factors that were cheaper and faster without thinking of the long-term implications. The arguments for safety were also ineffective. They involved e-mails chains and targeted the executives and their decision making abilities. They should have conducted in person meetings to show that they are focusing on the long-term safety of the product.

8.   As the CEO we would have viewed both sides of the arguments and though of the situation as a long-term investment. The initial upfront cost are easily justifiable over a long-term life of the rig. We would also analyze worst case scenarios if we chose either safety or the cheaper solutions. Having a risk management team to analyze both may have produced the environmental scenarios which actually occurred. Short-term the culture needs to include safety in their core values. Changing that immediately will start the long-term shift towards a safety driven company. We would also not make each rig run by individual executives. There needs to be conferences and meetings were the executives can share best practices. Instead of competing with one another, they need to work to continue to grow the overall BP brand. There also needs to be an increased risk management team. When they present their findings, it needs to be in a personal meeting. E-mail chains and phone calls are not proper ways to exhibit such critical information.

To make these changes stick, as a CEO, we would have strict guidelines to hold other accountable. We would continually travel to different rigs to have random inspections and attend these conferences to ensure that the best practices were being shared. Also, with changing the core values to focus on safety, we would only hire and promote others who share the safety values that BP needs.