CASE STUDY

On April 20, 2010, a drill ship owned by TransOcean and working on a BP oil lease (Macondo Prospect) in the Gulf of Mexico exploded, killing 11 drilling workers. In the weeks and months that followed, approximately 5 million barrels of crude oil poured into the waters of the Gulf where the vertical pipe broke near the ocean floor.

The investigation showed that the blow out preventer (BOP) purchased by TransOcean, from a company called Cameron, failed to close the well head and stop the flow of oil after the explosion, and subsequent sinking of, the drill ship. Although Cameron agreed to pay BP PLC a $250 million settlement in December, 2011, they did not admit any responsibility. There were also accusations that TransOcean didn't properly maintain the equipment, which may have been a contributing factor to the failure of the BOP.

On July 10, BP began operations to install a sealing cap, called Top Hat 10, manufactured by Hydril, one of Cameron's main competitors. Top Hat 10 temporarily stopped the flow of oil after 87 days of oil spilling into the Gulf of Mexico.

On September 3rd and 4th, the failed BOP was removed and lifted to the surface and the final cap sealed the well. The Cameron BOP was surveyed by DNV and a report was submitted to the U.S. Department of Energy on March 20, 2011.

The U.S. Government report published in September of 2011, stated that the likely cause of the explosion was a defective drill "mud" (cement) mixture created by Halliburton. A White House Commission blamed BP and its "partners" for a series of cost cutting measures while also acknowledging that "absent significant reform in both industry practices and government policies, (a similar event) might well recur." U.S. Coast Guard investigators blamed "poor risk management, last minute changes to plans, failure to observe and respond to critical indicators, inadequate well control response, and insufficient emergency bridge response training by companies and individuals responsible for drilling" the Macondo well.

BP was the designated operator under Bureau of Ocean Energy Management (BOEM) regulations and therefore ultimately responsible. Following BP's Texas City Refinery explosion in March of 2005, several technical and organizational failings were cited as contributing factors to that explosion.

BP's organizational structure was a modified silo structure, where safety culture was the main focus in some divisions but not as strongly encouraged in others. Some workers even stated "we hear what you're saying, but we know what we're really supposed to do" during safety training, implying that they are supposed to break the rules to facilitate the job.

BP Shipping was a division more stringently regulated by international organizations, whereas the division of Exploration and Production (E&P) was regulated by departments within state and federal government organizations. These state and federal governments existed (and still do) because of funding from oil companies through taxation and lease fees. With this type of structure, the regulating bodies are less likely to hold the oil companies to the letter of the law.

TransOcean, the owner of the drill ship was responsible for conducting safe operations and for protecting the drill ship personnel. Halliburton, as BP's contractor for the cement work, had certain well monitoring responsibilities. It was the failure of the Halliburton cement mixture which allowed gas to back up in the pipe and caused the explosion which killed the 11 people.

At the time of the explosion, the TransOcean drillship was overdue for a subsequent contracted job and the company was eager to move the ship to that new location. Halliburton had been unsuccessful at mixing a drill mud capable of handling the back pressure of the well, and BP was mostly concerned about the additional costs being accrued by the delays.

Question:

In hindsight (which we know is always 20/20) and prior to the explosion of the drill ship, how could EACH OF THESE THREE companies have achieved corporate profitability while still reducing risk and avoiding damage to the environment?