The Deepwater Horizon Disaster from a Systemic and Unexpected Management Perspective

Transcription

1 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 (fax) 6/27/2012 1

2 Complex Systems Almost Always Fail in Complex Ways Columbia Accident Investigation Board, August, /27/2012 2

3 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 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 6/27/2012 3

4 What Can the Nuclear Energy Industry Learn from the Deepwater Horizon Disaster? The difference between the old perspective on safety and the new perspective on safety How not to solve the wrong problem precisely What it means to be a system 6/27/2012 4

5 Safety Culture: Doing the Right Thing Even When Nobody is Looking Occupational Safety Keeping people safe Slips Trips Falls Process Safety Procedures for minimizing risk generally Decision making Communication Leadership Regulation Incentives Culture 5

6 Government The Arrow Regulators Company Management Operational Staff Actions Work A SYSTEM!!!! Accident 6/27/2012 6

7 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 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 6/27/2012 7

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9 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: 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 6/27/2012 9

10 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 6/27/

11 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? 6/27/

12 Relationships Among People Browne Hayward Dudley 6/27/

13 John Browne CEO Before that he was head of Exploration and Production Saw that BP was a stodgy company 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! 6/27/

14 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) 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 6/27/

15 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 CEO Hayward s business pressures were the same as Browne s Greater and greater reliance on contractors 6/27/

16 Tony Hayward CEO Career moved in lockstep with Browne s Was head of Exploration and Production Pledged to undertake a substantive review of company s risks Much of the safety challenge amounted to house cleaning Solved the wrong problem! 6/27/

17 On Hayward s watch Slashed USD 4 billion in expenses in 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 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) 6/27/

18 Robert Dudley Don t yet know what Dudley can do, but his hands are filled with oil spill consequences 6/27/

19 Relationships Among Organizations BP Minerals Management Service Transocean Schlumberger Halliburton 6/27/

20 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 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 6/27/

21 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 made money through production pressures In the Gulf they used lower cost, lower quality materials BP solved the wrong problem 6/27/

22 Transocean Owned drilling rig Deepwater Horizon Largest operator of offshore drilling rigs Inadequate monitoring of the well In a survey conducted in March % of the 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 6/27/

23 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 Halliburton (BP had little experience with foaming technology) Halliburton conducted 2 tests on the foam. Both failed Halliburton solved no problem 6/27/

24 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 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 6/27/

25 Minerals Management Service Mission: To manage the energy and mineral resources on the U.S. Outer Continental Shelf and to regulate the oil and gas industry Prescription as opposed to performance view of regulation 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 6/27/

26 A Conclusion If industry leaders Transocean, Halliburton and Schlumberger, had their own failures in the Gulf And since none of these companies were examined under a microscope as was BP You can expect them to fail again somewhere 6/27/

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