Case Study: BP and the Gulf of Mexico Oil Spill

Topics: Energy development, Petroleum, Petroleum industry Pages: 12 (3612 words) Published: April 1, 2014
Table of Contents
Question 1 ............................................................................................................................................................2 Do you agree with Tony Hayward’s quote at the end of the case? .................................................................2 Was this disaster strictly a BP failure or an industry accident?........................................................................2 What factors affect the competitive environment of the oil industry? ...........................................................2 Question 2 ............................................................................................................................................................4 What were the most significant flawed decisions made by BP and its partners in this case?.........................4 Was this a case of poor strategic choices that were made over time or of a high-risk taking culture? ..........5 Question 3 ............................................................................................................................................................5 How did BP’s history and culture shape decision-making on the Deepwater Horizon rig? .............................5 How did the political and regulatory environment affect decision-making by BP and its partners? ..............6 Question 4 ............................................................................................................................................................6 What factors does BP appear to take into account when looking at its long-term sustainability? .................6 What strategic approaches would you recommend to BP in order to ensure long-term competitive advantage in this industry? ..............................................................................................................................8 Bibliography ..........................................................................................................................................................9

Page 1 of 9

*Unless stated, all facts are from the case study.

Question 1
Do you agree with Tony Hayward’s quote at the end of the case? I would not agree in entirety with Tony Hayward’s claim that “This is not BP. It is an industry accident.” There are a number of weaknesses in the industry that allowed this incident to happen, but as numerous studies into this incident, including the National Commission set-up by President Obama to look into this incident – shows that the incident was caused mainly because of BP and in some instances by its partners on this rig – Transocean and Halliburton.

Was this disaster strictly a BP failure or an industry accident? To understand responsibilities in this incident, we can study the actions of the players of the offshore drilling sub-industry into three – government policies by the regulatory bodies such as the MMS (Mineral Management Service) and other government agencies, industry practices as a whole and actions by specific companies, in this case, BP, Transocean and Halliburton.

The regulatory body MMS had a clear conflict in overseeing the offshore drilling, as not only was it the body that ensured regulatory compliance, it was also financed by leases that it provided the oil companies for tracts in the Gulf of Mexico, and more importantly, MMS received royalties based on the amount of oil produced at various wells. It was in the interest of MMS to ensure oil extraction to start soonest, for royalties to pour in. In this role, it also became an industry partner, not only a regulator. MMS’s policies did not keep in pace with the rapid advancement of deepwater drilling, nor did it have in place enough resources, especially in terms of petroleum engineering talent to monitor these practices efficiently. Overall, the industry had a penchant for resisting federal monitoring. The statistics showing over 900 fires and explosions on...

Bibliography: 10 Disastrous Mistakes BP Made Before The Deepwater Horizon Exploded. (n.d.). Retrieved December 02,
2013, from http://www.businessinsider.com/bp-mistakes-2010-5?op=1
Applying the VRIO Framework. (n.d.). Retrieved December 02, 2013, from
http://academic.udayton.edu/dianesullivan/fall/2007/applying_the_vrio_framework.doc
BP: “An accident waiting to happen” - Fortune Features. (n.d.). Retrieved December 02, 2013, from
http://features.blogs.fortune.cnn.com/2011/01/24/bp-an-accident-waiting-to-happen/
Deep Water Summary To President. (n.d.). Retrieved December 02, 2013, from
http://www.housemajority.org/coms/anw/pdfs/27/deep_water_summary_to_president.pdf
Top 20 Risk Factors Facing the Oil & Gas Industry - Energy Digital. (n.d.). Retrieved December 02, 2013, from
http://www.energydigital.com/oil_gas/top-20-risk-factors-facing-the-oil-gas-industry
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