Risk Management Failures of British Petroleum

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BP is a British global energy company which is the third largest energy company and the fourth largest company in the world. As a multinational oil company, BP is the UK's largest corporation, with its headquarters in St James's, City of Westminster, London. BP America's headquarters is in the One Westlake Park in the Energy Corridor area of Houston, Texas; the company is among the largest private sector energy corporations in the world, and one of the six leaders. In order to project social responsibility and improve its image British Petroleum changed its name into BP in year 2000 with a logo of green and yellow sunflower patterns. Paradoxically the same company symbol is now under derision and the object of controversial attacks from environmentalists and damaging court cases. The company’s predicament further worsened when it was listed as one of the “ten worst corporations” during the year 2001 and 2006. In fact, BP and its competitors Royal Dutch-Shell were considered by activists to be responsible with the threatening phenomenon of climate change. BP was warned before the oil pipeline leak happened in Alaska, but no action was made by the higher officials to mitigate its possible occurrence and reduce damages. In March 2005, BP's Texas City, Texas refinery, one of its largest refineries, exploded causing 15 deaths, injuring 180 people and forcing thousands of nearby residents to remain sheltered in their homes. A large column filled with hydrocarbon overflowed to form a vapor cloud, which ignited. The explosion caused all the casualties and substantial damage to the rest of the plant. The incident came as the culmination of a series of less serious accidents at the refinery, and the engineering problems were not addressed by the management. Maintenance and safety at the plant had been cut as a cost-saving measure, the responsibility ultimately resting with executives in London. The fall-out from the accident continues to cloud BP's corporate image because of the mismanagement at the plant. There have been several investigations of the disaster, the most recent being that from the U.S. Chemical Safety and Hazard Investigation Board which offered a derisive evaluation of the company. The US Occupational Safety and Health Administration (OSHA) found organizational and safety deficiencies at all levels of the BP Corporation and said management failures could be traced from Texas to London. The company pleaded guilty to a felony violation of the Clean Air Act, was fined $50 million, and sentenced to three years probation. On October 30, 2009, OSHA fined BP an additional $87 million— the largest fine in OSHA history— for failing to correct safety hazards revealed in the 2005 explosion. Inspectors found 270 safety violations that had been previously cited but not fixed and 439 new violations. BP is appealing that fine. In August 2006, BP shut down oil operations in Prudhoe Bay, Alaska, due to corrosion in pipelines leading up to the Alaska Pipeline. The wells were leaking insulating agent called Arctic pack, consisting of crude oil and diesel fuel, between the wells and ice. BP had spilled over one million liters of oil in Alaska's North Slope. This corrosion is caused by sediment collecting in the bottom of the pipe, protecting corrosive bacteria from chemicals sent through the pipeline to fight this bacteria. There are estimates that about 5000 barrels (790 m3) of oil were released from the pipeline. To date 1513 barrels (240.5 m3) of liquids, about 5200 cubic yards (4000 m3) of soiled snow and 328 cubic yards (251 m3) of soiled gravel have been recovered. After approval from the DOT, only the eastern portion of the field was shut down, resulting in a reduction of 200000 barrels per day (32000 m3/d) until work began to bring the eastern field to full production on 2 October 2006. In May 2007, the company announced another partial field shutdown owing to leaks of water at a separation plant. Their action was interpreted...
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