The BP Oil Spill Crisis of 2010 - Deepwater Horizon Oil Spill - Case Study Example

The BP Oil Spill Crisis of 2010 (Deepwater Horizon Oil Spill): An Analysis Introduction This essay is about the manner in which BP, one of the leading oil companies in the world, managed the crisis that followed an accident on one of its drilling sites off the Gulf of Mexico. On April 20th, 2010, an explosion occurred on the company’s Deepwater Horizon oil rig (McMasters 2015). The explosion was largely attributed to a technical fault in the internal processes of the oil rig that caused highly explosive gases to leak (McMasters 2010). As a result of the explosion, 11 workers of the company were killed and 17 got injured. Also, the accident caused a massive oil spill in the Gulf of Mexico, directly affecting the lives of individuals and the operations of industries in the states of Louisiana, Florida, Mississippi and Alabama. In this paper, three key issues related to the accident are examined. First, a brief description of the incident is presented. Secondly, a detailed examination of how BP responded to the crisis is provided. Thirdly, a detailed analysis of the extent to which the company’s response to the crisis was effective is presented. A brief description of the incident BP, one of the leading oil companies in the world, was operating a Deepwater Horizon oil well off the Gulf of Mexico at the time of the crisis. The company had leased the oil rig from a Swiss-based company called Transocean and was operating it on the Macondo oil well. According to details provided by the company, the accident that occurred on 20th April 2010 was a result of a series of technical faults in the operations of the well, followed by repeated failure of the safety mechanisms that had been put in place to prevent the gas from leaking in the event of an explosion (BBC 2010). The accident caused serious damages to the reputation of the company, the environment and the lives of the employees of the company. As a direct result of the explosion, 11 employees of the company died (Webb 2010). The employees who died were on the rig at the time of the explosion. Also, 17 employees of the company were injured as a result of the explosion and the fire that burned for more than 36 hours (BP 2010). As well, the accident led to a massive environmental crisis as a result of a large amount of oil from the well spilling off the coast. It has been estimated that about 200,000 gallons of oil were leaking every single day during the crisis, causing unprecedented damage to the environment and the local tourism industry in the region (Beam 2010). At the organisational level, the company has estimated that is lost about $14 billion in handling the crisis that arose as a result of the accident (BP 2010). A big percentage of this amount was spent on oil cleanup activities. Also, reports indicate that the shares of the company fell by about 7% as a direct result of the crisis (de Wolf & Mejri 2013, p. 48). The CEO of the company at the time, Tony Hayward, was later replaced in what was believed to be a move by the company to reclaim its reputation following the crisis (Walsh 2010). A summary of how the company responded The manner in which BP responded to the crisis was based on two objectives: to contain the immediate effect of the accident, which was the environmental disaster arising from the oil spill, and to communicate its efforts to its stakeholders effectively (BP 2010). Therefore, the company sought to deal with the technical aspects of the crisis while at the same time, attempting to keep the public, authorities and other stakeholders informed of what was happening. On the technical side, the company responded by attempting to stop the oil spillage as fast as possible. It has been reported that the technical team of the company repeatedly attempted to deactivate the Blowout Preventer, a special valve meant to seal an oil well in the event of a disaster (Sandman 2010). However, all attempts by the company to reactivate the safety valve failed. Also, it has been reported that the company focused its attention on using innovative methods to seal the oil well as fast as possible and stop the oil spill that was clearly getting out of control (de Wolf & Mejri 2013, p. 52). To achieve this objective, the company used innovative methods to seal off the well with a mixture of mud and cement, thus managing to stop the leakage. On the other hand, the CEO of the company repeatedly issued statements about the crisis and what the company was doing (Webb 2010). However, days after the crisis, the company issued a comprehensive report, in which it acknowledged that it was largely responsible for the crisis (Webb 2010). But the BP report also pointed out that the other companies working on the rig were also partly to blame for the accident (BBC News 2010). The company then outlined all the technical measures it was doing to address the situation. After releasing the report, the company issued more press statements describing the steps it was taking to seal off the well and clean up the coast of all the oil that had caused a massive environmental disaster. Analysis of how the company responded The following is an evaluation of the manner in which the company responded to the crisis. The evaluation is based on particular theoretical perspectives of corporate crisis communication practices. In theory, corporate crisis communication is seen as a set of steps that organisations take in response to an unexpected event that threatens the operations of the organisation in question (Pancic 2010, p. 8). What this implies is that organisations engage in crisis communication activities in response to an event or series of events that disrupt its operations and threaten its objectives. It is important to take into consideration the nature of the crisis in which BP was before analysing the efficacy of its response. In theory, a typology of corporate crisis types covers the cause, nature and effect of any situation that can be described as a crisis (Coleman 2009, p. 178). Under cause, a crisis can be sparked by an accident, a scandal or any event that may occur within or outside an organisation (Coleman 2009, p. 178). In case of BP, the crisis was sparked by an accident that occurred within the facilities of the firm, crippling the operations of the company and causing an unprecedented reputation crisis for the company. BP had to deal with the effects of the accident on its stakeholders. As a result of the accident, 11 employees of the company died and scores of others were injured. Also, the accident sparked off a major environmental crisis as a result of a massive oil leakage that followed the explosion. Therefore, the company had to handle the direct consequences of the accident on its employees as well as the effect of the environmental crisis on its reputation. The second important aspect of corporate crisis communication is how a company that is in a crisis does the actual communication as a way of managing the crisis. In theory, a company that is caught up in a crisis should have an accurate understanding of the severity of the situation (Coleman 2009, p. 179). If a company can accurately judge a situation, it can develop the right message for the public and other stakeholders to whom it needs to communicate at the time of the crisis. Thus, the actual message that a company has to deliver to its audience and the actual manner in which it delivers the message during a crisis are important determinants of how well a company handles a crisis. Lerbinger (2012, n.pag) observes that companies that are faced with a crisis sparked by an accident need to adopt a defensive strategy when managing the crisis. In other words, a company that is facing a crisis as a result of an accident should point out that it did not have control over the situation at the time of occurrence of the accident. BP was quick to point out that the crisis was sparked by an accident (BP 2010). Also, the company pointed out that it had taken enough preventive measures before the accident occurred (Kimberly 2010). Additionally, the company emphasised that the leakage was a result of the failure of the blowout plug to seal the hole after the initial explosion (BP 2010). Therefore, it is clear that the company emphasised that the crisis was sparked off by an accident and that it had done everything within its powers to control the situation. An important thing that companies which are in a crisis have to deal with is the possibility of seemingly small and unrelated events escalating into a big crisis. In theory, this tendency of small events to cause big and unrelated ones is described using the chaos theory (Zaremba 2015, p. 65). Chaos theory implies that in practice, the manner in which a company responds to a crisis can deepen the crisis by triggering more serious and unpredictable events. It has been noted that the BP crisis was deepened by the manner in which the CEO of the company responded to the crisis at first (Shogren 2011). Although the company had issued a detailed statement about the crisis, the CEO, while commenting on what the company was doing at the time, failed to deliver the most appropriate message to the public (Shogren 2011). Given the level of severity of the problem, the general public wanted to hear that the company understood how serious the situation was at the time and that it was taking concrete steps to remedy the situation (Kimberly 2010). However, the statements by the CEO of the company were largely incoherent at the time and only worked to worsen the situation. From these observations, it is clear that BP failed to properly communicate to its stakeholders during the crisis. The company failed to deliver a credible message that would have shown that its management clearly understood the severity of the crisis and that it was taking concrete steps to address it. Failure by the company to craft a compelling message and deliver it in the most appropriate manner compounded the situation. Another important aspect of corporate crisis communication that can be used to assess the effectiveness of how BP handled its Deepwater Horizon crisis relates to keeping control over the messaging. In theory, organisations that are managing a crisis need to keep control over the message that spreads to the public as well as other stakeholders (Varnai 2010, p. 8). The public needs to know what the organisation is doing to contain the situation (Jugo 2013, p. 801). Other stakeholders have different needs. For example, regulatory authorities may require a different kind of information. Similarly, the employees of an organisation that is in a crisis may require a different type of information to assure them that the organisation is adequately dealing with the crisis (Jugo 2013, p. 801). In the case of BP, it has been pointed out that the company lost control over the messages about the accident that were going out to the public (Kimberly 2010). Additionally, Susskind, Bonn and Lawrence (2015, p. 9) note that the public perception about BP at the time was that the company did not comprehend the magnitude of the oil spill and its negative impact on the environment. It is noted further that many members of the public regarded BP as a company whose management was not primarily concerned with addressing the situation at the time (Beam 2010). On one occasion, it is observed that the management of the company could not provide accurate details of the technical actions it was taking to seal the leaking oil well (McMasters 2015). Also, at first, the company said that no oil was leaking, which was not accurate at the time (Kimberly 2010). Furthermore, throughout the time that technical teams of the company were working to seal the well, the manner in which the management of the company was communicating with the public was disjointed (Susskind, Bonn & Lawrence 2015, p. 8). According to some observers, BP did not have a comprehensive disaster response plan in place – having reduced the amount of money that it had been spending on disaster preparedness and management activities (Shogren 2011). Hence, it can be inferred that the disjointed manner in which the company handled its communication activities during the crisis was as a result of the lack of a comprehensive disaster response plan. Conclusion The following conclusions can be drawn from the foregoing discussion. It is clear that the BP Deepwater Horizon crisis was sparked by events that were beyond the control of the company. However, the company failed to properly communicate to its stakeholders about what it was doing to contain the situation. As a result of this, public perception of the company was that the firm’s management did not consider the accident as a major crisis. Also, the company did not have a comprehensive disaster management plan in place before the crisis occurred. Therefore, these factors compounded the situation, leading to the failure by the company to handle the crisis effectively. References BBC News 2010, ‘Timeline: BP oil spill,’ BBC News, 19th September 2010, viewed 15 February 2017, . Beam, C 2010, ‘Oil slick: How BP is handling its PR disaster,’ Slate.com, May 2010, viewed 15 February 2017, BP 2010, Deepwater Horizon accident and response, viewed 15 February 2017, . 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Pancic, N 2010, Crisis communication in theory and practice: analysis of cultural influence, strategy applicability and stakeholder relevance in Australia and New Zealand (Master’s thesis, Unitec, Auckland, New Zealand), viewed 19 February 2017, . Sandman, PM 2010, BP’s communication response to the Deepwater Horizon oil spill, Peter Sandman Risk Communication Website, May 5th, 2010, viewed 15 February 2017, . Shogren, E 2011, BP: A textbook example of not how to handle a crisis, NPR, 21 April 2011, viewed 19 February 2017, . Susskind, AM, Bonn, M & Lawrence, B 2015, ‘How the deepwater horizon oil spill damaged the environment, the travel industry and corporate reputations,’ Cornell Hospitality Report, vol. 15, no. 14, pp. 1-15. Varnai, S 2010, Crisis communication as an effective tool of change management, viewed 20 February 2017, . Walsh, B 2010, ‘Oil spill: goodbye, Mr. Hayward,’ Time, 25 July, viewed 15 February 2017, . Wearden, G 2010, ‘Gulf oil spill: BP lacked the right tools to deal with crisis, chief executive admits,’ The Guardian, 3 June, viewed 19 February 2017, . Webb, T 2010, ‘BP’s clumsy response to oil spill threatens to make a bad situation worse,’ The Guardian, 1 June, viewed 15 February 2017, . Zaremba, AJ 2015, Crisis communication: theory and practice, M. E. Sharpe, New York. Read More