BP's Deepwater Oil Spill Case Study Analysis - Business Ethics

Group 9
THE GULF COAST AND
THE BP OIL SPILL
BUSINESS ETHICS CASE STUDY
1. Ngô Thị Xuân Hường 3. Nguyễn Thị Thùy Dung
2. Trần Thị Thanh Tú 4. Thái Mạnh Cường

OUTLINE
CONTEXT OF THE CASE STUDY
DILEMAS FOR THE ISSUE
THEORIES AND ARGUMENTS
RECOMMENDATIONS

1. CONTEXT OF THE CASE STUDY
1.1. Background of BP Oil and Gas Group
• Founded in 1908
• Bristish Petroleum
• Headquarter: UK
• 2010 - 2nd largest oil
company in the world
• More than 92,000
employees

1.1. Background of BP Oil and Gas Group
BP’s Products

1.2. Disaster Deepwater Horizon
Deepwater Horizon
- owned and operated by
offshore-oil-drilling company
Transocean and leased by oil
company BP
- situated in the Macondo oil
well in the Mississipi
Canyon

Deepwater Horizon oil
spill (BP oil spill)
- Occurred in 20/4/2010
- Crude oil spilled into
the ocean through 3
major cracks

Gulf of Mexico

Already, this oil spill is the worst
environmental disaster America has
ever faced. And unlike an earthquake or
a hurricane, it's not a single event that
does its damage in a matter of minutes
or days. The millions of gallons of oil that
have spilled into the Gulf of Mexico are
more like an epidemic, one that we will
be fighting for months and even
years.
“
”

Apr. 29, 2010: Louisiana Gov. Bobby Jindal
declared a state of emergency
today because of the spill
Apr. 30, 2010: Floria’s Governor Crist issued the
first state of emergency
following the Deepwater Horizon oil
spill crisis.

1.3. Source of information
• BBC News, 2013, BP: Gulf of Mexico oil spill “shared responsibility”
• BBC News, 2011, BP oil spill: The environmental impact one year on
• National Graphic, Gulf Oil Spill
• New York Times, 2011, BP Shortcuts Led to Gulf Oil Spill, Report Says
• New York Times, 2010, Tracking the Oil Spill in the Gulf
• Wikipedia, Deepwater Horizon Oil Spill
• Vietnamplus, 2010, Công bố nguyên nhân vụ tràn dầu vịnh Mexico

2. DILEMMA FOR THE ISSUE
2.1. Ethical issue
• How would BP react to
the oil spill?
• Decision makers: BP’s
Board of Management.

*Conflict of interests:
In Causes of Deepwater horizon oil spill
PRODUCTION
PROFITS PROTECTION
SAFETY
2.1. Ethical issue
PERSONEL, EQUIPTMENT, NATURAL RESOURCES AND THE ENVIRONMENT

2.1. Ethical issue
- violate 7 federal
regulations at that time
- only one cement barrier
- ignorance of negative tests,
limitations of control machines
- no or little training about
the rare dangerous case
- failure to observe and
respond to critical indicators
- inadequate well control
response
- insufficient emergency
bridge response
- no precaution for employ
ees or state regulators
- lack of compliance to
safety standards or
accepted industry practice
- failure to take timely and
aggressive well-control
actions
Causes of
Oil Spill
No notification
of changing
Failure to notify federal
regulators of changes in drilling plans.

2. DILEMA FOR THE ISSUE
*Conflict of interests
Reaction to the disaster
2.1. Ethical issue
PROFIT
v
BENEFIT OF DIRECTORS s
COMPENSATION/LOSSES OF
THE AFFECTED COMMUNITIES
CLEANUP COST/DITERIORATION
OF ENVIRONMENT, ECOSYSTEMS
IMAGE OF THE COMPANY

2.1. Ethical issue
Available relevant information - Facts
1 The worst oil spill in the history
Tourism and fishing industry forced to stop. Residents’ life
2 seriously affected. Substantial damage to environment.
Key stakeholders: employees, gulf/coastal residents,
environment (water, animals), stockholders, government
3
Clear causes not available
=> BP believed that they were just merely negligent
4

2.1. Ethical issue
Available relevant information
Estimation of government authorities
68,000 square miles of direct
impact by leaked oil (SkyTruth)
491 miles (790 km) of
coastline in Louisiana, Mississip
pi, Alabama and Florida might
be contaminated by oil
(Bloomberge)
deep underwater plumes of dissolved
oil and gas would likely remain confine
d to the northern Gulf of Mexico
4.2m barrels – 176m gallons
(666m liters) spilled (Guardian)
62,000 barrels per day entered
the Gulf waters while BP estimates
were only 1,000 – 5,000 barrels
per day (BBC, NYT)

Tracking the
oil spill
New York Times

Naturally seeping oil in the
ocean.
Woods Hole Oceanographic
Institution

Available relevant information
Expected Consequences
Claims arising from the spill
Fines from government
Cost to clean up the water, treat the oil in the deep and
middle water, upgrade the quality of the environment
Badly damaged reputation
Cancellation or Loss of contract in the future
2.1. Ethical issue

STAKEHOLDERS
Environment
Government
Residents
Company
Investor BP
2.1. Ethical issue
Employees

Stakeholder
ENVIRONMENT
2.1. Ethical issue
• PAHs indicators were 40 times more than before => reduce marin
e oxygen levels => create “dead zones”
• Heart and other organs would be
expected to be fatal or at least
life-shortening
• Oil was found in many animals
=> matuted fish (change of
the nucleotide sequence of the genome)

Stakeholder
ENVIRONMENT
• Dead dolphins, dead birds, dead turtles,
dead fish
• Death of a Gulf coral community
• Tar balls found along the coast, coastal
islands, marshes (where rivers enter the
ocean) => death of tree and marsh grass
(National Graphic, The Atlantic)
• Oil fell to the ocean floor => remain in th
e food chain for the long term
2.1. Ethical issue

• 11 employees dead
• 108 workers affected by the toxic from oil and dispersant (to separate oil
into droplets) in the clean-up effort
Stakeholder
EMPLOYEES
2.1. Ethical issue

• physical health symptoms among
their children who lived in less than
10 miles from the coastline (NOAA)
• commercial and recreational fishing
in affected federal waters is closed
(225,290 km2) (NOAA)
• fish, crab and other animals found
dead => decrease in the quantity
=> fishermen got much smaller a
mount of fish
Stakeholder
RESIDENTS
2.1. Ethical issue

Stakeholder
RESIDENTS
• seafood from the Gulf is not trusted by
consumers though samples passed the test
of contamination
• many of the Gulf fisheries have collapsed
=> it is very hard to recover
• many people canceled their trip due to the
spills => much lower revenue despite low
er hotel rates, free service, changed
cancellation policy from the hotels
2.1. Ethical issue

• the real estate prices
and a number of
transactions in the Gulf
of Mexico area
decreased significantly
• many people lost jobs
and wages after the
spill
Stakeholder
RESIDENTS
2.1. Ethical issue

Stakeholder
BP COMPANY
• the spill response, containment, relief
well drilling, grants to the Gulf states,
claims paid, and federal costs
• badly damaged image
• BP's stock fell by 52% in 50 days on
the New York Stock Exchange
• 10 – 40% drop on sales
2.1. Ethical issue

• Investors saw their holdings in BP shrink to $27.02, a nearly 54% loss of
value in 2010 (New York Post)
Stakeholder
INVESTORS
2.1. Ethical issue

• 3 years to investigate and then rule the case Deepwater Horion
oil spill
• Ban of offshore drilling in state waters
• Law amendment
Stakeholder
GOVERNMENT
2.1. Ethical issue

2.1. Suggested solution to react the oil blowout
 Solution 1
BP might consider the oil spill was only an accident, prove a
gross negligence in the case and refuse the responsibility
for compensation and cost to clean up waters and recover the ec
osystem

It is not our
fault. The wrong
thing is our heavy
cost-cutting

 Solution 2
BP might not admit their faults and shift the blame to other
parties. The company could conduct some methods to collect and
dissolve only the surface oil and pledge to compensate the
affected people with the view to show their CSR and improve
the image of company. Then they can cook the report relating to
the environmental issue to reduce the impact of the oil spill to
undermine the claims and avoid paying compensation.

Not our
fault.
Transocean
messed up.
It is Halliburt
ons’ fault.

 Solution 3
The BP should react immediately by working with the officials to seek
effective methods to collect the spilled oil, close the oil well and
reduce the impact of the oil in the column of water on the surround-ing
ecosystem. Doing research to develop method for ocean life
recovery should be included in the long-term plan to improve the
water quality affected by the accident. In addition, the company should
build a channel to receive all the claims of the resident, verify and
make full payment for those really affected. In the long term,
moreover, the company should support the residents living along the
coastline in advertising the safe seafood and promoting the tourism.

3. THEORIES AND ARGUMENTS
3.1. Utilitarianism
- “The greatest good for the greatest number.”
- “The most good” & “The least harm”.
 Analysis for 3 solutions:
- S1 and S2: BP and other companies ignored their responsibilities, it was
an accident.
 violates this theory because they were irresponsible for the
consequences of their actions.
- S2 is better when BP did a little effort to resolve the visible problems.
However, it is only the tip of iceberg.

3.1. Utilitarianism
 Analysis for 3 solutions:
- S3 is the best one because:
 solve environmental issues immediately => minimize the negative impac
ts for environment and local resident.
 treat affected people well => reduce the sadness, suffering and econo
mic losses of people; give chances for their future careers
 have the suitable improvement for the sea and surrounded environmen
t, for local tourism and the company itself in the long term=> sustainabl
e development

3.2. Kant’s theory
Let’s consider 2 most important groups of stakeholders
 BP and related companies: have their own rights to do business legally,
gain profits and protect themselves from negative impacts
- S1: ignore their responsibilities, it was an accidents.
- S2: force them to pay a certain amount of money to resolve the
problem immediately but it could bring a good image for companies
because people think that they do CSR well.
 this action could protect companies.
- S3: the most costly and might lead companies to a difficult time.
 cannot protect the rights mentioned above

 Affected people (have rights to live in a clean environment, work in safe
working condition, and take advantages of natural environment to make
profits)
- S1: can not protect their rights
- S2: do for short term but in the long term, when the environment is
destroyed seriously, those people will lose their rights for living and
working.
- S3: protect their rights
 conflict between the rights of BP and the rights of affected people.

• According to the formula of humanity as end, a business organization and
their actions should be arranged so that they contribute to the
development of human.
 the rights of people who are affected should be taken the priority.
• the first formulation of the categorical imperative – that of making a
maxim into a universal law. This would forbid much of the exploitation and
pollution of the natural world, and required recovery and improvement
after harming environment
⇒ the third solution is the most moral one

4. RECOMMENDATIONS
4.1. Short-term
• Collecting the
spilled oil as soon
as possible
• Asking experts to
give the best
solution.
• Ensure that BP
would take
responsibility
for the
consequences
• Give the full
information
about the
spill
• Accept the
inspection
from the
government

4. RECOMMENDATIONS
• Ensure that the
company would
recover from this
disaster as soon as
possible.
• Compensate by
money and improve
their family’s spirits.
• Create a group of
staff to solve the
problems.
• Continue to do
business
4.1. Short-term

 Recover and Improve
the ecosystem
 Introduce them to new jobs
 Recover promotion for
tourism.
 Pay fully fines
 Enhance the security
system
4. RECOMMENDATIONS
Plans
 Find out and sign new contracts.
 Do business to help BP escape from
the issue as soon as possible
4.1. Long-term
 Test and enhance
the system and
standards for safety
 Give training courses
 Give the full safety
facilities in working

BP's Deepwater Oil Spill Case Study Analysis - Business Ethics

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