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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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  • Number of pages: 2

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1. INTRODUCTION

1.1 Purpose

The purpose of this report is to present community perspectives of the oil and gas industry, in the context of oil extraction, in affected communities of Louisiana, Mississippi, Alabama, and Florida in the United States of America.

1.2 Background - BP

BP plc, formerly referred to as, British Petroleum, is a British multinational company formed in 1954 from Anglo – Iranian oil company, with its headquarters in London. BP is one of the world's seven leading oil & gas companies and it basically operates in all areas of the oil and gas industry, including exploration, production, refining, distribution and marketing, petrochemicals, and power generation. BP's robust performance in 2012 made it the world's sixth-largest oil & gas company by market capitalization and fifth largest in terms of revenue generation.

1.3 Environmental issue - Gulf of Mexico Oil Spill

Oil spills are known to cause both immediate and long-term harm and environmental impacts to human health and ecosystems respectively. On 20 April 2010, the exploratory offshore drilling rig Deepwater Horizon located in the Macondo Prospect in the Gulf of Mexico exploded after a blowout, killing 11 people and injuring 16 others. After burning for two days, the rig sank and caused the largest accidental marine oil spill in the history of the petroleum industry. The disaster became a major global talking point and led BP to pleading guilty on 11 counts of manslaughter, 2 misdemeanors, and paying $4.5 billion in fines.

2. ANALYSIS

2.1 What could have possibly caused the spill? – Potential reasons

BP made careless errors in their supply chain which affected countless people, industries, and environment. The reasons behind this catastrophic disaster are numerous. But, prime reason behind this could be BP's ambitious strategy in cutting costs to increase production profits by employing suppliers who follow sub standards. Poor management decisions, deviations from care standards, lack of emergency risk knowledge, and carelessness towards known risks are all contributors to the worst environmental disaster in the history of the USA. It all started when a surge of natural gas blasted through a concrete core installed by contractor Halliburton to seal the well for later use. Cement used to seal gas and oil from ascending to the surface is of inferior quality. 18 out of 39 blowouts were reportedly due to usage of ‘quick-dry cement'. Can the supplier Halliburton alone be blamed? Deeper evaluation of facts suggested that mechanical valves set to control the flow of oil failed at this point. All of the above phenomenon happened just because of the careless misinterpretation of the test results carried before. Also, as the members of the crew at the site were not trained well about the dangerous case, they couldn't spot the leak soon enough. Emergency bridge response was insufficient and no precautions were communicated to the employees. As a whole, failure to identify proper suppliers, usage of inferior quality equipment, and delays in taking well and controlled actions contributed to the disaster. Is this the first ever such incident happened from BP's end? History suggests something else. In September 2008, similar incident was reported in the Caspian Sea drilling rig areas of BP. This clearly indicates BP's problems in identifying proper suppliers. Now, who gave the authority to BP, just because of their improper management of supply chain, to put lives of countless people under stake?

2.2 Consequences of the oil spill

As a major consequence of the spill, 210 million gallons of crude oil was released into Gulf of Mexico, which is a major source of seafood to the United States. 70% of the seafood comes from the gulf coast. Directly affected from the spill are the seafood buyers, as their whole supply chain is affected and they are forced to look for possible alternatives. In total, 8832 species residing in the area of the spill are affected. Out of this, 50 species were already on the federal list of protection. Creatures like dolphins, birds, turtles, and fish died as the oil penetrated by a mile deep into the ocean. Coral community of the gulf perished. Total food chain of the area is disturbed seriously. Marshes, islands surrounding the coast, and pretty much all the coast line are filled with tar balls. As a result, recreational and commercial fishing are forcefully closed in the affected areas of Louisiana and Florida. The real estate prices and a number of transactions in the Gulf of Mexico area decreased significantly. Tourism in the area declined by 48%. Many people lost their jobs and wages after the spill. Children living in the vicinity of 10 miles of coastline are found to have major health symptoms. Also, the spill took a toll on wildlife from big to small and had profound impacts on food industry, support industry, oystermen, shrimpers, fishermen, and cultural heritage of the affected areas. Agitations took place demanding BP's activities in the Gulf of Mexico to be shut down. Who should be held accountable for this? BP itself.

3. RECOMMENDATIONS

If cost implication is major reason behind following sub standards, BP should consider local suppliers who comply with quality standards to reduce transportation costs. Employing local talent is critical to mitigate the negative effects imposed on the lives of the locals by the spill.  Losses endured by locals should be compensated through job creation. Residents of the affected communities should be given training in physical health effects, psycho social effects, and subsistence fishing issues. BP should also help recover promotion of tourism. This will help enhance credibility of BP. A firm's survival and excellence in the industry is heavily dependent on the relationship status with the local community. Sound relation with local individuals can improve firms' competitiveness and decision-making. To avoid costly delays, reduce lawsuits, and to enhance BP's reputation within the community, good community relations are vital. By considering locals' viewpoints and concerns, better and innovative projects can be designed.

3.1 Involvement and Integration of community

Forums are to be set facilitating the community to express their views on BP's activities. To create a synergy among the participants, a dialogue should be created from discussion. The place of discussions should preferably be informal. Encouraging the community to participate and present their views frankly and spontaneously will definitely prove helpful. Engaging community in the planning process should become an integral part and routine of BP. Furthermore, the solutions proposed by concerned individuals should be integrated into the decision-making process. Different techniques like surveys, consultation committees, informative websites, public hearings, brainstorming with locals, conflict resolution, and work groups contribute towards involvement and integration of the community.

4. FINAL THOUGHTS

Community engagement doesn't happen all of a sudden. It is more of a gradual and continuous process. Being transparent and accountable to the community and keeping them up to date on next steps and outcomes potentially drive BP towards successful engagement with locals. With a goal of continuous learning, evaluation of the processes by getting continuous feedback will help improve each phase of engagement process.

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