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May-June 2010

"BP’s Deepwater Disaster: We’ve never hit an iceberg before – full steam ahead?”

BP, and perhaps many other oil & gas companies, risked their entire business on the flawed assumption that their last-resort safety device was infallible because it had never failed before.
The cold facts On April 20th there was an explosion on the drilling rig Deepwater Horizon in the Gulf of Mexico killing 11 people. The rig caught fire and eventually sank leaving oil leaking from the sub-sea wellhead pipe in various places. BP is the main operator of the oil field and is held responsible by the US authorities for the clean up and subsequent damages.
Cause of the problem?

The exact causes have yet to be established but BP apparently have identified up to seven interlinking causes for the escape of gas from the well onto the rig and subsequent explosion. One thing is certain – the final fail-safe safety device that was intended to automatically operate to shut off the oil flow from the well at the seabed in an emergency failed to do its job. The Blow-out Preventer (BOP) failed to close and has resisted all attempts to close it since the accident.

What are the results? Oil is leaking into the Gulf of Mexico at up to 60,000 barrels per day, although a substantial portion is now being collected by BP via a loosely-fitting cap on the wellhead linked to surface ships. Current worst-case scenario cost estimates range up to $70bn. This includes clean-up costs, damages claims, and potential massive fines from the US authorities should criminal negligence be proven. Investors will also try to claim for loss in value of shares. It is hardly surprising BP’s Chief Executive Tony Hayward claimed ignorance at the US congressional hearing into the causes of the disaster. He, and other senior managers, could face jail sentences.
Effect on Shares? BP’s share price plummeted over 50% in about 10 weeks, although as the leak approaches a hoped-for solution shares have recovered a little. BP’s reputation and its supposed thinking on ‘Beyond Petroleum’ have taken a massive hit. Tony Hayward is quoted as being “the most hated and clueless man in America”.
 

Analysis and Lessons

Leadership v Management … Change … People-Thinking … Risk Analysis
What are the root causes? There are several root causes of this massive problem with no quick solutions. They involve Leadership, Organisational Culture, Risk, and the way people think.
The Leadership issue
… let’s start with
People-Thinking, a key aspect of Whole-Brain Thinking for Leaders

Tony Hayward has been very brave in agreeing to be the face of BP in America and taking all the flak and bile thrown at him. Unfortunately, in terms of Whole-Brain Thinking, People-Thinking is not one of his strengths (see Clear Thinking). He has found it extremely difficult developing empathy with the American media, the American public, and the White House. His Myers Briggs Personality Type indicator would probably show him to be a Thinker rather than Feeler.

The result of this, in extremely tiring and pressured circumstances, has been massively damaging PR gaffes such as “I’d like my life back” and taking a recreational break on his yacht.
Leadership Development Compare Bob Dudley. No doubt helped by being American, Mr Dudley seems to have made an instantly acceptable face of BP when he took over holding the fort from Mr Hayward in America. Clearly more of a People Thinker. And his experience of dealing with the Russians with TNK-BP must have been a tremendous leadership development project. A definite candidate for the CEO job if Tony Hayward is forced out.
A clear Vision
but not a clear Plan
… and overall Controls are suspect

Following the Texas City refinery disaster, BP suddenly realised that Lord Browne’s leadership had produced a more creative and entrepreneurial culture that put safety as a secondary thought. Tony Hayward was elected to the CEO job with a mandate to improve operational controls.

He appeared to have been very successful at improving operations and cutting costs. He set out a vision whereby focusing on efficiency and cost-controls could coexist with focusing on safety. Unfortunately this dual-focus balancing act has now been proved to be much more difficult to put into practice than he thought.

One of the key Roles of Leadership is ensuring Controls are put in place. Mr Hayward seems to have had problems in checking that safety was controlled.
Safety Culture evidence Evidence existed well before this disaster that focus safety was blurred. BP in US continued to be fined for safety violations (reportedly 760 in one period compared to ONE by Exxon). One reason for possible slippage in safety culture may lie in BP’s Performance Appraisal system. BP managers may have had a natural tendency to focus on the most measurable success behaviour. Cost-cutting and efficiency improvements are much easier to define and measure than safety.
Risk Analysis.
What could go wrong?

Risk Analysis is not an exact science. It involves creative-analytical imagination to guess what could go wrong, then working out the probability of an event actually occurring, and the magnitude of the risk. In the Deepwater Disaster case it transpires that BP’s Contingency Plan put forward to the US authorities was flawed. The Plan was clearly inadequate to deal with the oil spill that occurred. Doubts have emerged about the Contingency Plans for other Oil & Gas companies operating in the Gulf - they seem to contain the same erroneous data.

It’ll never happen.
“Oh yes it can”.

BP’s thinking on “What could go wrong?” was fatally flawed. Because there had never been a case before where a Blow-out Preventer had seriously failed, we suspect that BP’s managers suffered from the Titanic syndrome – “This ship has been designed to be unsinkable, so we can ignore the icebergs.”

We have had experience in designing safety systems for offshore oil & gas platforms. A common response from design engineers when we pointed out possible risks was: “It’ll never happen.” Our standard reply was: “Prove it.” This forced them to think more carefully about the reality of highly dangerous plant.

Should have learned from NASA’s disasters Changing a culture isn’t easy. NASA was aware of a safety culture problem after the Challenger disaster (failed O-ring). But it failed to change that culture before the next major disaster, Columbia (foam insulation). Managers were aware of the O-ring dangers, but by a massive GroupThink error, went ahead with the launch. And, a few years later, they were aware of the foam insulation problem. The foam had broken off several times before but no damage resulted so they ignored it.
Understanding how people think is essential in business management

A major aspect of business management, especially in Leadership, change, communications, and safety design, is understanding HOW PEOPLE THINK, how people are likely to respond/react/behave.

Tony Hayward clearly had problems appreciating how America would think about the disaster and his response to it. And, presumably, he had difficulty in thinking how his managers would react to his change initiative regarding safety.

“Every dollar counts”
Yes, but cutting back on safety can turn out to be extremely costly. It's a fine balancing act between two very different ways of thinking.

When designing their change programme to get people to cut costs whilst also thinking about (and acting on) safety, BP’s senior managers presumably thought that their operations managers/staff understood the fine balancing act between cost-cutting and safety. Clearly, this was not the case.

We have witnessed a situation where part of a process plant exploded. On inspection, we found that an operator had locked a pressure safety relief valve in a closed position. It was most fortunate that nobody was killed. Safety systems need to be designed to allow for human errors/behaviour, where possible. It is essential to think how managers and operators think and are likely to behave.

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