Administration of british petroleum its success and failures


BP is one of the world's major energy companies, supplying its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday matters. BP's businesses are organized to deliver the energy products and services people around the world need right now. Their business is broken down into three areas: Exploration and Production, Refining and Marketing and BP Alternative Energy (About BP, 2010).

BP's Exploration and Production business locates, manufactures and transports oil and gas to sell. They operate in 30 countries and employ more than 20,000 people. Their strategy is to invest to grow production efficiently by:

Strengthening their portfolio of leadership positions in the world's most prolific hydrocarbon basins, enabled by the development and application of technology and strong relationships based on mutual advantage.

Sustainably driving cost and capital efficiency in accessing, finding, developing and producing resources, enabled by deep technical capability and a culture of continuous improvement (About BP, 2010).

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BP Alternative Energy may be focused on the newest forms of fuel and power, but it draws on the traditional strengths that BP has built up over a century of finding, producing and delivering energy to its customers. They think that renewable and alternative energy will make up an increasing share of the mix and we have therefore invested around $4 billion since 2005 in low-carbon technologies with the potential to become material businesses for BP. The key thrusts of our alternative energy efforts are a series of biofuels ventures focused on sustainable feedstock's, increasing our US wind capacity, restructuring our solar business to reduce cost and increase competiveness and technology development in hydrogen power and carbon capture and storage projects (About BP, 2010).

Standard & Poor's Ratings Services recently lowered the long-term credit rating of BP to A from AA- and kept it on CreditWatch with negative inferences, representing that it can further downgrade the oil company in the future. The downgrade reflects their opinion of the challenges and uncertainties that BP continues to face in the aftermath of the explosion on the Deepwater Horizon rig in the Gulf of Mexico, and the subsea Macondo well blowout. These doubts and uncertainties come on the heels of the complexities that BP had in containing the spill as well as the eventual extent of the pollution, the penalties for BP of ongoing official investigations, and the implications of these investigations for the magnitude and timing of further cash payments by BP (S&P cuts BP to 'A' on oil spill challenges, 2010).

The BP shareholders have lost about $88 billion and it is thought that this will grow. That is approximately how much money investors have lost on paper as the oil giant's share price has plunged. In the grim calculations of the spill, the lives and livelihoods lost, the barrels of oil spewing into the Gulf of Mexico the financial toll keeps mounting. BP is so large, and its stock is so widely held, that these troubles are being felt across the investment world. Large insurance businesses in Britain, large money management companies in the United States and government proscribed investment funds in Norway, Kuwait, China and Singapore are among the company's major stockholders. BP may be a British company, but Americans own half its stock. After weeks of tremendous market losses, shareholders were dealt another blow when BP announced that it would suspend paying dividends for the rest of the year and establish a $20 billion fund to pay claims arising from the spill. While BP's share price stabilized after that news the developments did little to ease the anxiety of investors (BP's Shareholders Take It on the Chin, 2010).

Many believe that BP shareholders will have to pay for their investment in a company that is thought to be responsible for what history may evaluate as the worst environmental disaster ever. BP is thinking about slashing its annual $10 billion dividend payout in a cash hoard to pay for costs associated with the Deepwater Horizon gusher. Some experts have criticized a dividend cut because it penalizes innocent shareholders, widows and orphans invested in pension funds. They contend that BP shouldn't bend to the Obama administration and lawmakers who argue that the move is prudent given the inability to stop the leak, the $1 billion spent so far to fix, contain and clean it up and the hundreds of billions in potential economic damage to Gulf communities (Sorry, shareholders, there will be BP blood, 2010).

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BP's trading partners aren't as worried as its investors by the catastrophic Gulf of Mexico oil spill. Traders continue to do business with BP, which produces processes and markets huge quantities of oil, natural gas and fuels worldwide. If a dividend cut were to take place it is thought that it would be devastating to BP stockholders. Many buy and hold the stock strictly for the dividend. BP stock offers the major dividend of any U.K. company. BP, with $130 billion in assets and those unbelievable profits, may in the end be able to pay for its liabilities without cutting the dividend (Sorry, shareholders, there will be BP blood, 2010).

The containment efforts have played out as investors have deserted BP amid fears that the company might be forced to suspend dividends, end up in bankruptcy and find itself overwhelmed by the cleanup costs, penalties, damage claims and lawsuits generated by this oil spill. Shrimpers, oystermen, seafood businesses, drilling crews that are out-of-work and the tourism industry all are getting in line to get paid back the billions of dollars washed away by the disaster, and tempers have flared as locals direct outrage at BP over what they see as a tangle of red tape (BP Now Valued At Less Than Its Assets, 2010).

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According to federal law, BP is required to pay for a range of damage, including property losses and lost earnings. Residents along with businesses have been able to call a telephone line in order to report losses, file a claim online and seek help at one of 25 claims offices around the Gulf. Deckhands and other fishermen have needed to show a photo ID and documentation showing how much money they typically earn. In order to jump-start the process, BP was initially offering an immediate $2,500 to deckhands and $5,000 to fishing boat owners. Workers could then receive additional compensation once their paperwork and larger claims were approved. The oil giant had expected to spend $84 million through June in order to compensate people for lost wages and profits. That number was expected to grow as new claims were received. When it is all over, BP could be facing at total liabilities in the billions, perhaps tens of billions, according to analysts (BP Now Valued At Less Than Its Assets, 2010).

This disaster, which has become known as the BP spill in the US and the Deepwater Horizon oil leak in the UK had divided two longtime allies, and ignited severe populist anger on both sides of the Atlantic. As businesses and multiple layers of government have worked to control the oil, US citizens have blasted BP. For the moment, investors tackle paying for far-away disasters, the energy industry expects new regulations and costs, neighboring nations wait for oil to wash up on their shores and developing nations review drilling provisions with foreign firms. The US has already settled with BP, the world's fourth largest company, in order to hold back dividend payments until the end of the year. They have set aside $20 billion in an escrow account as a starting point in order to pay for damages (Froetschel, 2010).

This oil spill catastrophe shows how good governance and caution guard the environment and maintain the interest of investors. As the crisis progressed, accusations flew across the Pond thick and fast. British politicians and commentators have said that the US, in seeking discount prices for oil, have cut corners on oil-drilling safety conventions, leading the way to the disaster. The reality is that as of December 2009, the US and UK investors had roughly equal shares of BP stock, almost 80 percent altogether. The suspension of dividends affects shareholders on both sides of the Atlantic. Contrary to what has been depicted in the media, the force on British pension funds is insignificant. BP consists of less than two percent of the typical UK pension fund portfolio. Still, investors and policymakers examine prices, habits and regulations around the globe. A gallon of BP gas costs about £4.50 in England, which is more than $6.50 in us dollars, while US consumers pay less than half of that (Froetschel, 2010).

The disaster demonstrates exactly how oil is a global matter. The Deepwater Horizon drilling rig was put together in South Korea for a drilling firm based in Texas, and was purchased by Transocean, which is based in Switzerland. The rig was insured for $560 million by major insurers which are based in the US, Switzerland and the UK. It is thought that the costs for insuring drilling vessels and operations could go up by as much as 50 percent (Froetschel, 2010).

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Nowadays, the idea that offshore drilling is safe seems ridiculous. The Gulf spill nowhere compares to drilling disasters that have occurred in the past including one off the coast of Santa Barbara, Calif. in 1969 that discarded three million gallons into coastal waters and led to the present moratorium. The Deepwater Horizon calamity is a standard low probability, high impact event. It is the kind that has been seen more and more recently (Mcquaid, 2010).

The consequences of this spill are only beginning to be seen, as the exact causes of the initial explosion on the drilling platform and the malfunction of a blowout preventer to deploy on the sea floor probably won't be ascertained for many weeks or months to come. But the summary of many serious universal problems have already emerged, indicating just how misleading the notion of risk-free drilling really was, while pointing to some potential areas for reform. These mistakes include weak government oversight of the compound technical challenge of drilling deep wells many miles under the ocean surface and BP's collapse to evaluate or even consider any worst-case scenarios (Mcquaid, 2010).

A blowout on an oil rig happens when some mixture of pressurized natural gas, oil, mud, and water gets away from a well, shoots up the drill pipe to the surface, expands and ignites. Wells are outfitted with structures called blowout preventers that sit on the wellhead and are theoretically supposed to shut off that flow and tamp the well. Deepwater Horizon's blowout preventer failed to work as it should have. Two switches, one manual and an automatic backup, failed to initiate it. When such disastrous mechanical failures occur, they're almost always figured out that there were flaws in the broader system. This could include the personnel on the platform, the corporate hierarchies they work for, or the government administrations that oversee what they do (Mcquaid, 2010).

There appears to be a problem with fragmentation of responsibility. Although Deepwater Horizon was BP's operation, BP leased the platform from Transocean, and Halliburton was doing the deepwater work when the blowout happened. Each of these organizations had fundamentally different goals. BP wanted access to hydrocarbon resources that feed their refinery and distribution network. Halliburton provided oil field services. Transocean drove drill rig. Each had different operating processes and different objectives. The more intense problem seems to be the failure of the companies to put the risks in view. BP and other companies tend to gauge safety and environmental conformity on a day-to-day, checklist basis. This is almost done to the point of basing executive bonuses on those metrics. But even if worker accident rates fall to zero, that may reveal nothing about the risk of a major disaster (Mcquaid, 2010).

Oil giant BP has held responsible porous cement, failed safety valves and a string of poor decisions by workers for the explosion of the Macondo well. Transocean has criticized the report, calling it an attempt to hide the real cause of the explosion. The company, which owns the oil rig, has blamed the disaster on what it portrays as BP's seriously flawed well design. In both its design and structure, BP made a series of cost-saving decisions that amplified the risk and in some cases severely compromised the quality (BP: 'Sequence of failures' caused Gulf oil spill, 2010).

These things lead to some fundamental problems that need to be looked at in response to the Gulf oil spill. The company needs to re-evaluate their policies in regards to cost saving decisions in order to ensure that these types of decisions are not jeopardizing overall safety. They also need to look at what outside resources that they are using and have a plan in place to make sure that all outside companies being utilized are the best that there is. The qualities of these outside products are, in the end, vital to the safety of their overall projects. The last thing that BP needs to change is that they need to have a better disaster plan in place to deal with things like that if they should ever happen again. It did not seem that when this happened that they had much of a plan on what they should be doing and when.

The organizational development intervention that BP should use to implement the changes that they need to is that of Technostructural Interventions. Technostructural interventions center on improving the organizational success and human development by focusing on technology and structure. These interventions are entrenched in the fields of engineering, sociology, and psychology, combined with socio-technical systems and job investigation and design. These kinds of interventions rely on a shortage based approach. The goal is to find problems to solve. Technostructural advances focus on improving an organization's technology like task methods and job design along with structure like division of labor and hierarchy. Technostructural interventions include: organizational structure, organization systems, business process redesign, space and physical settings, socio-technical systems, change management, job design / enrichment, competency-based management, knowledge management and organizational learning (Organizational development (OD) interventions: Managing systematic change in organizations, 2009).

The main focus in techno-structural intervention, which deals with the restructuring of the organization; is the restructuring in the division of workload of overall organization in to subunits for completion of the task effectively. Restructuring can be performed on at least five major factors, environment, organization size, technology, and organization strategy and world wide operation. The second other major factor of techno structural intervention is the employees' involvement and the final component of intervention is work design, broadly speaking work design is of two types, one is of scientific management which is task oriented, the other type of work design is motivational approach (Imran and Aslam, 2010).

Changes must be undertaken systematically. The success ratio for the change increase greatly, when we use the proper model of planned change. In spite of all the planning and development change never successfully happened and mostly the reason behind this failure is resistance. To overcome the conflict and for the success of change numerous factors can pressure, these can be management participation and support, employees' participation, information sharing and the most important is leadership. The sequenced, planned, organized and managed from the top changes are called the interventions. While designing intervention, concept of effective intervention has much importance which describes that effective intervention is providing the free and informed choice to the employees by the organization (Imran and Aslam, 2010).

While putting together some interventions, individual differences like skills, knowledge, and a need for autonomy, organization factors like management structure, Employees and culture and dimension of change process like management support, employees' involvement and power must be considered. While implementing interventions in the organization, there are four major options that are available and considered strategic interventions. Strategic involvement is of broader term describes the corporate as well as business level strategic intervention like cultural change, strategic change, self design organization, and integrate strategic management (Imran and Aslam, 2010).

In order for BP to do all that they can to prevent a disaster like the Gulf oil spill from ever happening again, they have to implement organizational change. They have to change the way that communication is handled within their company as there has been tremendous evidence that this was an issue with the disaster. They must also put together a good what if disaster plan so that they can know what to do and when to do it a whole lot sooner than they did this time.

If they work to make the improvements that are needed then they may begin to start regaining the confidence of their stakeholders. In the end the stakeholders want to know that the company that they have invested in is successful. They want to get a good return on their investment and know that they have chosen the right company in which to put their money. A company should make their most important goal to make sure that they deliver the most that they can to their stakeholders and they the live up to their end of the bargain.