Discuss about the BP Oil and Gas Industry.
The BP or Deepwater Horizon oil spill is considered as the biggest oil spill in the entire history of United Kingdom. The explosion of Deepwater Horizon in the Gulf of Mexico severely injured and destroyed the lives of several people. Furthermore, because of the explosion, the fire burnt for over one and a half days, thereby creating havoc and leading to mass destruction all around. Not only the businesses located in the Gulf region but also the tourism and fishing industries were badly affected because of the spill. Companies associated with this spill faced various problems as they were under an obligation to not only clear the spill but also compensate the ones affected due to it. In order to initiate relief proceedings, an attorney group was found and BP had to encounter various lawsuits because the impact of the spill was disastrous as it spread over 490 miles, thereby affecting many states including Florida, Mississippi, etc. Since BP was the key player in the Macondo Project, the consequences encountered by it were completely legitimate and accurate because companies that put the environment at stake owes a non-delegable responsibility in the form of such consequences (Chevron Corporation, 2013). Going by the impacts and the overall assessment it will be clear that BP flouted the and hence the fines and penalties were legitimate.
Since BP played the key role in creating such havoc and destruction through the spill, it had to encounter such problems in the form of lawsuits and compensation. In the initial segments, BP will be taken into consideration and thereafter the environment in which the company operates will be considered. Furthermore, the vigor of the spill will also be given due importance in order to understand the financial entanglements, lawsuits, and other problems encountered by BP (CBS Chicago, 2013). Moreover, this research also aims to advocate about the financial impacts faced by BP after the oil spill. Hence, this research is very significant, as the deficiencies possessed by the oil companies can be known and companies like BP might remain cautious in future.
British Petroleum, a leading international producer of gas has many histories of gross misconduct in its operations since 1995. In relation to the oil spill, it is notable that it was not only the biggest but also the most disastrous in the entire history of UK. This makes it clear that BP’s misconduct was highly punishable by law because the businesses, individuals, marine habitats, etc were all badly affected by the Gulf of Mexico. Moreover, Tony Hayward, Chief Executive of BP agreed to all these damages and claims, as it had no other option (BP Plc, 2014).
Since the effects of the spill were massive and widespread, spill cleaning was the prime responsibility of BP. Therefore, the company took several steps to clean the spill and for this operation, it directed a fleet of vessels and arranged various tools that could assist the vessels in collecting the oil floating in water (Jacobson, 2013). Approximately 5000 vessels and ninety thousand people were directed to complete this process efficiently. Furthermore, BP had to incur around $14 million for this operation and after completion of this process; around 827,046 barrels of oil were collected (Channel News Asia, 2017). As per the survey, out of 4300 miles of shoreline, around 635 miles required manual oil cleaning procedures. Taking all these impacts in due consideration, these consequences were appropriate for the company.
Since BP was the main player in the oil spill, it was under a non-delegable responsibility to take corrective actions, whether the consequences are high or not. Hence, it decided to take various actions in order to restore the Gulf of Mexico and other affected states. These actions comprise of cleaning, research, compensation, etc that required millions of dollars (Mason, 2010). In relation to this, approximately $37.2 billion was kept aside by BP in order to manage all the expenses associated with the disaster (Fodor & Stowe, 2010). An oil spill trust was also introduced in association with this matter and it cost a whopping amount of $20 billion to the company (BP Plc, 2012). In addition, BP also undertook a responsibility to pay $1.25 billion as additional payments every quarter until 2013. These figures depict that BP had to expand heavily in the restoration process but taking the impacts in due consideration, this had to be done.
In order to evaluate the environmental impact of the oil spill, BP coordinated and worked with various state and federal bodies. Furthermore, an NRD (Natural Resource Damages) was also initiated in this regard so that the magnitude of damages can be determined and thereafter, proper corrective actions can be decided for the same. In these activities, BP incurred more than $600 million that is a huge expense. In addition to this, BP arranged to undertake many observational surveys to ascertain the impact of the spill on wildlife habitats. Efficient steps were thereafter taken in order to safeguard and relocate the sea turtles by creating special rehabilitation centers for these creatures (Broder & Krauss, 2011). BP also offered a whopping amount of $22 million to the national wildlife and fish foundation. In addition, the company also incurred more than $500 million over the period of ten years to create an unbiased research program for lessening the impact of the spill.
Since several other states were also affected by the spill, BP had assured payments of $87 million to these states in order to safeguard the tourism industry from the disastrous influence of the spill. In addition, BP also arranged to extend $92 million in the year 2011 for the period of three years wherein $63.5 million was provided in 2011 itself and the remaining amounts in 2012 and 2013 respectively. The company also made proper arrangements in order to examine the seafood industry over the entire region of Gulf of Mexico (Broder, 2012). In relation to this, BP had expended more than $9.3 million for examination of seafood in the year 2011 and an additional $24.2 million in the year 2012. Furthermore, BP also expended an additional $7.1 million for seafood marketing in the year 2011. Hence, taking all these in due consideration, it can be said that the company had to encounter huge obligations but in lieu of the disastrous impacts on businesses, habitats, individuals, etc, these consequences are appropriately fair and accurate (Broder, 2012).
In the United States, there was a lack of effective and thorough policy especially in the hands of the officialdom. Therefore, it was certain that the policy to stabilize the competing interests to determine the attainment and utilization of energy were missing. Moreover, since the oil spill came out to be the biggest disaster, this clearly highlights the inefficiency of the regulatory authorities on their part. Furthermore, this also signifies that the failure of regulatory framework was not only attributable to the regulatory authorities, but also to the environmental laws on a whole. Hence, it was evident that the regulatory authorities and the legal system failed to function effectively, thereby leading to such a massive disaster and affecting millions of diversities and people.
According to several investigations, it came out that the presence of powerful and efficient statutory policies could have assisted in safeguarding from such a disaster. Hence, this also portrays a misbalance in the theory of public interest and notion of effective corporate governance and ethics. Furthermore, in relation to the theory of public interest, if the markets were left to operate on their own, then they would behave indifferently since they are delicate in nature (Jefferson & Bowling, 2011). However, the oil spill still occurred even in the prevalence of proper control by the statutory authorities. This depicts a failure and inefficiency on the part of authorities.
It is the prime responsibility of the regulators to act in an efficient manner so that the public interests are not taken for granted and proper assistance is provided to them. Furthermore, contingencies are uncertain and the regulators must make proper ways and create backup strategies in order to be prepared for such situations. However, this failed to happen in the case of BP oil spill that clearly sheds light on their inefficiencies, thereby leading to a massive havoc.
Because of such a massive disaster, ways were planted for several new procedures and plans. The oil spill incident came out to be one of the biggest mistakes on the part of BP, thereby leading towards the destruction of businesses, wildlife habitats, and the environment as a whole. Investigations carried out after the disaster sheds light on the urgent requirement of effective corporate governance in companies (Cleveland, 2010).
It was also notable that BP did not compensate in full for the damages occurred in the Gulf of Mexico and other states. If the investigation were not conducted, the company would not have come forward in order to accept their grave mistake. Moreover, the company was fined a whopping amount of $4 billion that is not a heavy amount when compared to their never-ending profits of more than $11 billion.
The closing share price of BP as on 19 April 2010 reported at $59.48 whereas its market capitalization reported at $186.20 billion. It is notable that on the day of occurrence of the oil spill, BP’s stock price depicted an upward trend rising from $59.48 to $60.48 (Booz & Hamilton, 2010). This came out to be a shock even after the massive impact of the oil spill. However, after nine days, the stock price started falling down and reported at $54.7, which is a massive decline of 8.3%. Since this day, the stock prices continued to decline and reported at $27.02, which is a decline of 54.6% since 19 April. Moreover, in terms of market capitalization, this decline portrayed a massive loss of $101.59 billion (CBS Chicago, 2013).
The above report gives a strong emphasis on the oil spill and it is clear from the discussion and argument that there BP flouted laws and made grave mistakes. The result gives a glaring response that there must be stringent policies on the oil companies so that any law is not broken. Further, the oil, as well as gas companies must chalk out emergency plans and the offshore operations must be aware of it. There must be a strong hazard program and skills must be updated so that potential liability can be meeting with ease and flexibility.
Conclusion
When it comes to huge entities like BP it has a strong team that has a strong hold so that any potential liability can be minimized. As a matter of fact, the Oil Spill had a disaster impact on BP and its partner. To make up for the loss, BP sold $30 billion assets for the cleanup, legal claims, etc. This comprised 20% of the total assets of the company and ultimately was followed by a huge set back to the prices of stock. The policies that look after corporation’s liability are noted with precision. However, the stress must now be provided on the part of the corporate social responsibility that will negate the negative impact on the society and create goodwill for the company. Acts like BP oil spill can be eliminated if the regulator crafts a strong policy and committee are set up for looking at such situations.
References
Booz, A & Hamilton, A 2010, The Offshore Oil and Gas Industry Market Response – Part One, Department of Energy, National Energy Technology Laboratory.
Broder, J. M 2012, Ruling Favours Owner of Rig in Gulf Spill, The New York Times, viewed 28 January 2017, https://www.nytimes.com/2012/01/27/business/energy-environment/transocean-not-liable-for-some-gulf-spill-claims-judge-rules.html.
Broder, J. M., & Krauss, C 2011, Regulation of Offshore Rigs Is a Work in Progress, The New York Times, viewed 28 January 2017, https://www.nytimes.com/2011/04/17/us/politics/17regulate.html?pagewanted=all&_r=0
BP Plc 2014, Annual report and accounts 2014, viewed 27 January 2017, https://www.bp.com/content/dam/bp country/de_de/PDFs/brochures/BP_Annual_Report_and_Form_20F_2014.pdf
BP Plc 2012, Annual report and accounts 2014, viewed 27 January 2017, https://www.bp.com/content/dam/bp/pdf/investors/bp-annual-report-and-form-20f-2012.pdf
CBS Chicago 2013, BP Settles Class-Action Lawsuit Over Tainted Gasoline, CBS Chicago, viewed 27 January 2017, https://chicago.cbslocal.com/2013/08/21/bp-settles-class-action-lawsuit-over-tainted-gasoline/
Channel News Asia 2013, BP says oil spill compensation fund running out, viewed 25 January 2017, &lRequired actiont;https://www.channelnewsasia.com>.
Chevron Corporation 2013, Corporate Responsibility, Chevron, viewed 27 January 2017, https://www.chevron.com/corporateresponsibility/
Cleveland, C. J 2010, Deepwater Horizon Oil Spill, viewed 26 January 2017, https://www.eoearth.org/article/Deepwater_Horizon_oil_spill?topic=50364.
Cherry, M.A., Sneirson, J.F 2010, ‘Beyond Profit: Rethinking Corporate Social Responsibility and Green washing after the BP Oil Disaster’, Tulane Law Review, vol. 85, no.4, pp. 983-1038
Fodor, A., Stowe, J.D 2010, The BP Oil Disaster: Stock and Option Market Reactions, Working Paper, Ohio University.
Jefferson, J., Bowling, N 2011, The Economic and Biological Impacts of The BP Oil Spill, NDS 372.01 Environmental Studies Capstone Seminar.
Jacobson, M 2013, By the Numbers: The Oil Spill and BP’s Legal Troubles, PBS News Hour, viewed 26 January 2017, https://www.pbs.org/newshour/rundown/2013/07/gulf-oil-spill-by-the-numbers.html.
Mason, J.R 2010, The Economic Cost of a Moratorium on Offshore Oil and Gas Exploration to the Gulf Region, Working Paper :Louisiana State University.
Yahoo 2013, BP plc (BP), Yahoo Finance, viewed 26 January 2017, https://finance.yahoo.com/q?s=BP.
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