The Deepwater Horizon Disaster from a Systemic and Unexpected - - PowerPoint PPT Presentation

The Deepwater Horizon Disaster from a Systemic and Unexpected Management Perspective

Karlene H. Roberts Haas School of Business Canter for Catastrophic Risk Management University of California, Berkeley karlene@haas.berkeley.edu 510.642.4700 (fax)

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“Complex Systems Almost Always Fail in Complex Ways”

Columbia Accident Investigation Board, August, 2003

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Agenda

• What the nuclear power industry can learn from

the Deepwater Horizon disaster

• Two kinds of safety culture
• What happened in the Gulf

The costs

• The costs
• Indicators of lack of process safety

– Where leaders direct their organizations: Browne, Hayward, Dudley – What goes on in organizations that must work together: BP, Transocean, Halliburton, Schlumberger, MMS

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What Can the Nuclear Energy Industry Learn from the Deepwater Horizon Disaster?

• The difference between the “old” perspective
• n safety and the “new” perspective on safety
• How not to solve the wrong problem precisely
• How not to solve the wrong problem precisely
• What it means to be a system

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Safety Culture: Doing the Right Thing Even When Nobody is Looking

Occupational Safety

• Keeping people safe
• Slips
• Trips

Process Safety

• Procedures for minimizing

risk generally

– Decision making Communication

Trips

• Falls

– Communication – Leadership – Regulation – Incentives – Culture

5

The Arrow

Management Management Operational Operational Company Company Regulators Regulators Government Government Work Work Operational Operational Staff Staff Actions Actions

Accident Accident

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A SYSTEM!!!!

What Happened in the Gulf

• On April 20, 2010 the Deepwater Horizon drilling

rig blew up

• Eleven people were killed
• Seventeen more were seriously injured

The drilling rig burned for 18 hours and then

• The drilling rig burned for 18 hours and then

sank

• Oil spilled from the well for 86 days
• It released 200 million gallons of crude oil
• This killed valuable wildlife and ruined both the

gulf and surrounding lands

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The Costs

• Total cost USD 40 billion (Huffington Post,

Guardian)

• BP paid USD 713 million in lost tax revenues to

Louisiana, Alabama, Florida, and Texas

• Hard to estimate costs to:
• Hard to estimate costs to:

– Fishing industry (At the peak of fishing season the closure of 88,000 square miles of sea) – Tourist industry (Oxford Economics estimated USD 7 - 23 billion) – 100,000 businesses who sued – 405,000 individuals who sued

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The costs, cont.

– Nature’s critters (Known deaths of 6045 birds, 609 marine turtles, 100 sea animals, 300 bottle nose dolphins) – 1,000 miles of shoreline were heavily or moderately oiled – Massive coral die off – Damage to the floor of the Gulf

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Indicators of a Lack of Process Safety

• What happens under various leaders

– Where do they put resources? – How attentive are they to precursors of trouble?

• What’s going on within the organizations

which have to work together

– How attentive are they to safety issues?

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Relationships Among People Browne Hayward Dudley

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John Browne CEO 1995-2007

• Before that he was head of Exploration and

Production

– Saw that BP was a stodgy company – Wanted to implement more aggressive management Wanted to implement more aggressive management – Did that by cost cutting Reorganized the company to make it lean and mean Maintenance of the Alaska pipeline was reduced Refinery at Texas City was starved of resources Solved the wrong problem!

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On Browne’s watch….

• Grangemouth Complex had 3 accidents (2000)
• Alaska well pad explosion (2002)
• Texas City refinery blows up (2005)

Thunder Horse platform almost sinks (2005)

• Thunder Horse platform almost sinks (2005)
• U.S. Commodities and Future Trading

Commission sues BP for cornering and then manipulating the market price for propane (2006)

• Between 2000 and 2009 more than 350 large

spills in Alaska

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Browne and Hayward

• BP was a bad company but that had nothing

to do with Hayward (says Hayward)

• Hayward ran Exploration and Production and

had Browne’s attention well before he became had Browne’s attention well before he became CEO

• Hayward’s business pressures were the same

as Browne’s

• Greater and greater reliance on contractors

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Tony Hayward CEO 2007-2010

• Career moved in lockstep with Browne’s
• Was head of Exploration and Production
• Pledged to undertake a substantive review of

company’s risks company’s risks

• Much of the safety challenge amounted to

house cleaning

• Solved the wrong problem!

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On Hayward’s watch…

• Slashed USD 4 billion in expenses in 2009
• 2010 refinery subsidiary paid more than USD 50

million to Occupational Safety and Health Administration (OSHA) to settle claims that it failed to address safety problems failed to address safety problems

• High pressure gas line exploded in Alaska
• By spring 2010 more than forty percent of

Horizon’s rig days were non productive (downtime)

• Deepwater Horizon blows up (2010)

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Robert Dudley 2010-

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Don’t yet know what Dudley can do, but his hands are filled with oil spill consequences

Relationships Among Organizations

BP Transocean Minerals Management Transocean Halliburton Schlumberger Management Service

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BP Is Not The Only Player In The Game

• BP owns the well, contracts with Transocean

to drill the well

• BP contracts with Halliburton to complete the

final cement job on the well final cement job on the well

• BP contracts with Schlumberger to test the

adequacy of the cement job

• Minerals Management Service (MMS) is the

US regulator of these activities

• Thus, we have a system of organizations

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BP

• Under Hayward and Browne’s leadership BP cut

costs over a 15 year period

• BP lowered maintenance on the Alaska pipeline
• BP cut training costs
• BP cut training costs
• BP made money through production pressures
• In the Gulf they used lower cost, lower quality

materials

• BP solved the wrong problem

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Transocean

• Owned drilling rig “Deepwater Horizon”
• Largest operator of offshore drilling rigs
• Inadequate monitoring of the well
• In a survey conducted in March 2012 46% of the

workers feared they would face reprisals if they workers feared they would face reprisals if they reported unsafe situations

• Used a cheap and less reliable casing
• Used fewer centralizers than prescribed

(centralizers hold the casing in place)

• Transocean solved the wrong problem

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Halliburton

• Industry leader in foam cementing
• Called in by BP to do the cementing after

Transocean completed the drilling

• Cementing is inherently uncertain

BP placed a number of significant constraints on

• BP placed a number of significant constraints on

Halliburton (BP had little experience with foaming technology)

• Halliburton conducted 2 tests on the foam. Both

failed

• Halliburton solved no problem

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Schlumberger

• The world’s leading supplier of technology, integrated

project management and information solutions in the gas and oil industry

• BP contracted with Schlumberger to do a “bond log” to

insure that the solitary cement barrier in the well insure that the solitary cement barrier in the well would hold

• A Schlumberger crew was on the rig to do the test
• BP ascertained the cement would hold
• BP sent the Schlumberger crew home
• Schlumberger solved no problem

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Minerals Management Service

• Mission: To manage the energy and mineral resources
• n the U.S. Outer Continental Shelf and to regulate the
• il and gas industry
• Prescription as opposed to performance view of

regulation Few and inadequate resources

• Few and inadequate resources
• Lack of training
• Preoccupation with revenues as opposed to safety

(solving the wrong problem)

• Degeneration of ethical culture
• MMS could not solve the safety problem

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A Conclusion

• If industry leaders Transocean, Halliburton and

Schlumberger, had their own failures in the Gulf

• And since none of these companies were
• And since none of these companies were

examined under a microscope as was BP

• You can expect them to fail again somewhere

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