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BP and the Gulf of Mexico Oil Spill. Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline.

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Presentation on theme: "BP and the Gulf of Mexico Oil Spill. Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline."— Presentation transcript:

1 BP and the Gulf of Mexico Oil Spill

2 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

3 The Explosion This incident is regarded as one of the most serious ecological disasters in history On April 20, 2010, the oil rig, Deepwater Horizon, explodes in the Gulf of Mexico. 11 people are missing and 17 people are injured. The majority of individuals aboard the rig are Transocean, BP, and Halliburton employees at the time of the explosion.

4 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

5 British Petroleum - “BP operates at the frontiers of the energy industry. We use world-class assets, technology, capability and know-how to meet energy needs and deliver long- term value.” - Market Capitalization: $181 billion Halliburton - Founded in 1919, one of the largest players in the oil and gas industry. - Composed of over 55,000 employees. - Contracted to cement the oil pipe to the ocean floor. Transocean - World’s largest offshore drilling contractor mobile offshore drilling units, plus an additional eight new rigs. - Owners of the rig, the Deepwater Horizon. Key Players

6 Federal Government Mineral Management Service (MMS) −Federal agency responsible for overseeing the well’s drilling and operations. −Created in 1982 to generate revenues from oil well royalties for the federal government. −Also created to oversee the oil industry to ensure safe practices. −Lack of oil expertise because of the increasingly complicated drilling industry. −Conflict of interests and lack of oversight.

7 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

8 The History of British Petroleum William Knox D’Arcy, Anglo-Persian Oil Company. Renamed Anglo-Iranian (AIOC) in World’s largest refinery at Abadan. 200,000 workers in scorching conditions Continued to supply Allied fleet during World War II. “When the rains subsided, clouds of nipping, small-winged flies rose from the stagnant waters to fill the nostrils, collecting in black mounds along the rims of cooking pots and jamming the fans at the refinery with an unctuous glue.” - Manucher Farmanfarmaian, describing winter working conditions, 1949

9 The History of British Petroleum Dr. Mohammed Mossadegh, Nationalizes AIOC’s holdings. World crisis ensues, US and UK boycott, block any other European technicians from replacing the British ones that were fired. Rebrands itself as British Petroleum in BP’s controversial image plays large part in political rhetoric, gives way to 1979 revolution and the Islamic Republic.

10 The History of British Petroleum Nationalization schemes of Arab states forces BP to look outside region for alternate sources of oil. Begins pumping oil out of Prudhoe Bay, Alaska in −One of the largest infrastructure projects in North America. BP is now the second largest oil company, operates in 100 countries and can produce 3.5 billion barrels a year. Record in North America is tainted with a recent series of severe safety violations that contradicts their “green” image.

11 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

12 Green Campaign “I believe the American people expect a company like BP... to offer answers and not excuses.'' - Lord John Browne, BP CEO, March 2002

13 Green Campaign Spends $200M in 2000 to rebrand itself as “Beyond Petroleum.” Redesigns the 70 year-old BP shield into the BP “Helios.” New York is specifically targeted, advertisements appear in Times Square. Lord John Browne acknowledges climate change: −Pushes BP to confront climate issues −Candidly acknowledges company’s mistakes −Enters dialogue with environmental groups. Campaign is designed to address skepticism consumers have toward Big Oil.

14 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

15 Safety Record Texas City, Texas 2005: −15 people killed, injured 180 −“improperly released vapor and liquid” Alaska, 2007: −200,000 gallons of crude oil spill into the wilderness due to corrosion along the pipeline −Pays $16M in criminal fines Occupational Safety and Health Administration reports that BP ran up 760 “egregious, willful” safety violations in a three-year span: −Accounts for 97% of total number of industry safety violations −Pays $373M to avoid federal prosecution

16 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

17 How Does Drilling Work? The Deepwater Horizon is the oil rig that prepares the well for drilling. It is essential to pump mud and seawater down the casing string in order to ensure pressure equilibrium. If too much pressure is exerted, the rockbed can be damaged and result in collapse.

18 Long String Casing and Centralizers

19 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

20 Timeline: April 20 April Explosion and fire on the BP-licensed Transocean drilling rig Deepwater Horizon in the Gulf of Mexico. Eleven people are reported missing and approximately 17 injured. 25 April US coast guard remote underwater cameras report the well is leaking 1,000 barrels of crude oil per day (bpd). 26 April BP's shares fall 2% amid fears that the cost of cleanup and legal claims will hit the London-based company hard. APRIL MAYJUNE JULY AUGUSTSEPTEMBER

21 Timeline: April APRIL MAYJUNE JULY AUGUST 28 April The coast guard says the flow of oil is 5,000 bpd, five times greater than first estimated, after a third leak is discovered. BP's attempts to repair a hydraulic leak on the blowout preventer valve are unsuccessful. 29 April President Obama pledges "every single available resource," including the US military, to contain the spreading spill, and also says BP is responsible for the cleanup.. SEPTEMBER 30 April An Obama aide says no drilling will be allowed in new areas until the cause of the Deepwater Horizon accident is established US bans new drilling in Gulf of Mexico.

22 Timeline: June APRIL MAY JUNE JULY AUGUST 3 June BP faces political flack over its decision to pay out more than $10bn (£6.8bn) in dividends to shareholders, despite the deepening crisis. 15 June Fitch ratings agency cuts BP's credit rating as the cost of the spill continues to escalate. 16 June BP agrees to a $20bn (£13.5bn) down payment toward compensation for victims of the oil spill. SEPTEMBER

23 Timeline: July 26 July The BP chief executive, Tony Hayward, is to leave the company, to be replaced by Bob Dudley, a BP veteran overseeing the clean-up. 27 July Greenpeace activists close 46 BP garages in central London in a move to force the company to become greener. Safety switches at the pumps were stolen. APRIL MAYJUNE JULY AUGUST

24 Timeline: August / September BP Statistical Review of World Energy 2008 APRIL MAYJUNE JULY AUGUST 25 August BP's poor reputation, following the Gulf of Mexico oil spill, forces it to pull out of a bid to drill in the Arctic. 8 September BP releases its own report that blame must be shared between all entities involved. 16 September BP falls out of a major marketing consultancy's list of the top 100 brands. BP falls off Interbrand's index for the first time in 11 years. 19 September The leak is finally closed. Costs estimated to $40 billion. SEPTEMBER

25 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

26 What Caused the Disaster? The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling concludes: There is not one single cause of the disaster. BP, Transocean, and Halliburton all are responsible for the disaster. The primary cause is blamed on the cementing process of the oil pipe to the well and the inherent risks of drilling to extreme depths. Blame placed on the MMS for lack of expertise and conflict of interest.

27 What Caused the Disaster? The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling concludes in the report to the President of the United States: “…the Macondo blowout was the product of several individual missteps and oversights by BP, Halliburton, and Transocean, which government regulators lacked the authority, the necessary resources, and the technical expertise to prevent.” “The immediate cause of the Macondo blowout was a failure to contain hydrocarbon pressures in the well. Three things could have contained those pressures: the cement at the bottom of the well, the mud in the well and in the riser, and the blowout preventer.” Long string casing Additional need for centralizers Unstable cement Poor immediate action training

28 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

29 Initial Communication “Our concern and thoughts are with the rig personnel and their families. We are also very focused on providing every possible assistance in the effort to deal with the consequences of the incident.” – Tony Hayward, BP CEO (April 21, 2010) “BP assumes full responsibility for the oil spill” –Tony Hayward, BP CEO (April 23, 2010) “It’s not our spill.” – Tony Hayward, BP CEO (May 3, 2010) InconsistencyConfusion Contradictory

30 Key Communications Figures Carl-Henric Svanberg -Chairman, Board of Directors -Former CEO of Ericsson, assumed Chairman position in September 2009 Tony Hayward -Chief Executive Officer -28 years with BP, “Home grown” knowledge of the company Doug Suttles -Chief Operating Officer, BP Exploration -Led BP reaction to deepwater spill

31 Executive Involvement President Obama delivers a special address to the nation Mentions BP six times by name Does not mention Halliburton or Transocean one time President appoints Coast Guard Admiral Thad Allen as National Incident Commander Authority on disaster recovery (Hurricane Katrina) Became face and voice of recovery effort

32 Social Media Focus April 27: BP Begins daily “tweets” outlining containment and support efforts May 6: Daily use of BP website for photo, video, map and written updates May 2: BP connects with Facebook fans who “like” the BP recovery effort with daily posts June 3: “We will make this right” video airs on YouTube for the first time

33 Paid Media Effort  “We Will Make This Right” campaign airs in June 2010  $50,000,000 price tag draws widespread criticism  Designed to appeal to a national audience

34 Spillcam Viewed daily on more than 3,000 websites worldwide 24 hour live-feed of oil flow Began as a response to pressure from Congress Created to present a more open, transparent stance

35 Table of Contents Oil Spill Incident Key Players History of BP Green Campaign Safety Record Drilling Operations Timeline Causes of the Spill Communications Effort Communications Problems

36 Addressing Severity Apr 27 Spill mentioned in three sentences after discussion of robust 1Q earnings Apr “Oil is spilling at 1,000 barrels per day” “Oil is flowing at 1,000-5,000 barrels per day” May 17 In comparison to the ocean, this is a “relatively tiny” oil spill Overall, this is a “very, very modest” spill May 23 “We’ve turned the corner” May 30 “I’d eat fish from these waters”

37 Self-Inflicted Wounds  “No one wants this to be over more than me. I want my life back.” –Tony Hayward  “We care about the little people.” – Carl Henric Svanberg “I’m sure we can all understand that [Tony Hayward] wants to spend some time with his family.”


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