BP: Putting Profits Before Safety?
| Case Code: BECG071 Case Length: 21 Pages Period: 2005-2007 Pub Date: 2007 Teaching Note: Available |
Price: Rs.400 Organization: BP Plc. Industry: Oil and Chemical Countries: USA, Europe Themes: Business Ethics, Employee Safety culture |
Abstract Case Intro 1 Case Intro 2 Excerpts
Bp - Green or Mean?
On January 16, 2007, the BP US Refineries Independent Safety Review Panel issued its report (popularly known as the Baker report) on its review of safety issues in BP Plc.'s (BP) refineries in the US. BP, the world's third-largest oil and gas producer after Exxon Mobil Corp.7 (ExxonMobil) and Royal Dutch Shell8 (Shell), had been plagued by safety lapses in its facilities in the last couple of years.9 The panel was formed in October 2005, after The US Chemical Safety and Hazard Investigation Board (CSB) had uncovered many safety lapses at BP's Texas City refinery during the investigation of an explosion that occurred on March 23, 2005, which had resulted in 15 deaths and 170 people being injured.
CSB said that BP might have endangered its workers by compromising on process safety and because of its emphasis on cost cutting.
Calling into question BP's safety culture, CSB recommended that BP should form an independent review panel to review the safety of its five refineries in the US.
The 11-member panel, which was headed by former US secretary of state, James A Baker III (Baker), was critical of BP's safety culture and the leadership demonstrated by BP's top management with regard to safety issues. The chairman of CSB, Carolyn W. Merritt (Merritt) agreed with this finding when she said, "Safety culture is created at the top, and when it fails there, it fails workers far down the line. That is what happened at BP."
The panel decried a sense of complacency regarding safety issues at BP's refineries and BP's emphasis on personal safety but lack of leadership on process safety issues. The panel lauded BP for co-operating with the review process and said that it did not find sufficient evidence that BP might have intentionally jeopardized the safety of its employees through its cost cutting measures. The panel outlined ten recommendations to BP and urged it to take this opportunity to become a leader in safety issues.
The Texas accident was not the only safety lapse at BP. In March 2006, a huge oil spill was discovered in BP's pipeline at Prudhoe Bay, Alaska, USA. The spillage was due to a corroded transit pipeline. Investigations found that BP had not been maintaining the pipeline properly. The Pipeline and Hazardous Materials Safety Administration12 ordered BP to review the leak detection system on the affected line as well as two other crude transit pipelines in Prudhoe. Critics were incensed by the fact that BP had last used a pipeline inspection gauge13 (pig) on the pipeline in 1998.14 This led to a criminal investigation by the US Attorney's Office (in Anchorage, Alaska) into the leaks.
On August 6, 2006, BP announced that it had discovered severe corrosion in its pipe and had decided to shut down the oil field indefinitely. This led to an outcry against BP by the public and some policy makers in the US. Safety measures at this oilfield had been neglected despite it accounting for 8 percent of the oil produced by BP. Critics alleged that BP had put profits before safety.
On January 12, 2007, BP surprised analysts by announcing that BP's CEO Lord Robert Browne (Browne) would relinquish his position at the end of July 2007. It announced that the head of BP's exploration and production, Tony Hayward (Hayward), would succeed him...
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