The Deepwater Horizon Fatal Disaster

But on April 20, 2010, the Deepwater Horizon rig, an exploratory oil platform located in U.S. waters in the Gulf of Mexico under the contract to BP exploded, killing 11 workers, injuring 17 others and spilling nearly 5 million barrels of oil. For two whole days, the coast guard fought the inextinguishable fire and on 22 April 2010, Deepwater Horizon sank, leaving the oil rigs well gushing oil across the Mexican Gulf seabed, inevitably leading to the largest ever oil spill in U.S waters.

Final reports of the disaster demonstrate that multiple risk management failures were the leading factors to the disaster. An investigative panel found no evidence that BP performed a formal risk assessment of critical operational decisions made in the days leading up to the blowout. BPs internal report in 2007 show a pervasive culture of unwillingness to stop work when something was clearly wrong. Other factors influencing such behaviour may include BPs exemption received from the US government from doing an environmental impact study which would have required them to provide details on how they might control a potential spill. Cash is also not an issue for BP as they are enjoying abundance of cash and profits.

Oil and gas industry operations include inherent risk from natural, manmade or human error and mechanical causes. It was found that the Macondo Prospect drilling contract was several days behind schedule and time certainly is money in industrial operations. Pressure to get the job done as soon as possible may have contributed to the fatal accident. Several key human error factors were also involved. Sample of other risk for the project are as follows:

• What is the blow-out-preventer (BOP) of the well fails to close off the well in the event of a blowout? Since the BOP had not been inspected in 5 years, it might be important for the company to consider this risk as the effect of it is catastrophic a large blow out.
• There were issues of inadequate choice of cement to seal the well, whether it was in line with industry best practices. The cement barrier was designed to isolate the hydrocarbons in the well. Sample test reveals potential issues. Improper choice would lead to other potential failures leading to much larger risk.

Required:

1. Analyse BPs risk appetite in relation to the above case.
2. With reference to the risk assessment and planning model, how should BP have managed the risk mentioned above?