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Scope of Spill

More than 200 million Gallons of


Crude Oil

Timeline
Day 99:
BP CEO
Hayward
Steps
Down
Day 84 & 87:
BP says Leak has
Stopped
Day 59:
Hayward Testifies to
Congress
Day 58:
BP creates Damages
Fund
Day 50:
Obama Whose ass to
kick
Day 37:
Top KillJunk
Shot
Day 45:
Robots to
the

Day 1:
4/20/10
Deepwate
r Horizon
Rig
Explodes

Day 6:
BP Robots
Not to the
Rescue
Day 8:
Fed Starts
Investigating
Day 10:
Obama Pledges
Resources
Day 11:
White House Stops
Expansion of
Offshore Drilling

Day 33:
Obama
Announce
s Oil Spill
Commissi
on

Day 22:
BP
Executive
s Appear
before
Congress

Decision Analysis Outline

1.
2.
3.
4.
5.

Production Decisions
Cost Cutting Decisions
Management Decisions
Safety & Ethical Decisions
Political Decisions

Decision Analysis

What Decisions were made for this


to happen?

Production Decisions

Proble
m

Locatio
n

Design Decisions
Production casing was
set in a location that
created additional
risks of hydrocarbon
influx.
Used only one cement
barrier even knowing
the risks of casing
location.

Alternative
s

Additional
mechanical
and or
cement
barriers.

Biases

Overconfiden
ce

Production Decisions
Problem

Strength
analysis for
cement

Failed
Negative
Test

Cementing
Decisions
Continued with
the cement job
without the final
comprehensive
strength analysis
report.
BP engineer did
not access and
review the
available real time
data. Instead
relied on the site
leaders assurance
that the rig crew
had successfully

Alternatives

Biases

Real time
cement data
analysis.

Anchoring

Share
information
with rig
operators.

Confirmati
on

Production Decisions
Problem

Frequent
changes
of
procedur
es

Decisions
Used Long String
Design with 6
centralizers which
was not
recommended by BP
engineers because it
could not be
cemented reliably.

Temporary
abandonment
procedure was
different from
Minerals

Alternative Errors/Bias
s
es
Use liner
design &
21
centralizers
.

Overconfide
nce

Temporarily Confirmatio
abandon the
n
well without
setting any
production
Escalation
casing.
of
commitment
Follow the
approved
procedure.

Production Decisions

Did organizational constraints shape BPs decisions?


Did individual differences & biases cause deviation from
rational decisions?

Did intuition have any place in BPs decision making process?

Did BP make Rational Decisions?

Cost Cutting Decisions


The Deepwater Horizon project was six weeks
over schedule
and approx. 50 million over budget.
BP management made many decisions that was
based on saving time and money.

Costs decisions related to Deepwater Horizon Oil


Spill:
Cheap Well-design
Improper deployment of cement mix
Cutting short on industry best practices

Cost Cutting Decisions

The Decision Criteria


Pressure to re-coup sunk costs
Time Sensitivity of the Deep Horizon project
Poor communication with external parties
Management deliberate disregard to operate
under the BP Risks Assessment Policies.

Cost Cutting Decisions


Key Bias that factored to BP Decision-Making
Process
Anchoring Bias: Management focused on meeting short-term
goals.
Escalation to Commitment: Deployed short-cuts in order to
meet project goals.

Cost Cutting Decisions

BP Oil Spill could have been avoided


BP decision makers should have considered the
negative impact reports they received.
Further analysis of short-term cuts vs. long-term impact
could have been considered.
Shifting corporate culture where safety and risk
management is a strong factor to compensation.

Management Decisions

Failure
of Leadership
and
Decision
Making without
Management
considering
contingencies
and mitigation.
Poor risk management.
Failure to observe and
respond to critical indicators.
Inadequate control response.
Communication Failure.
Reorganization of operational
functions & personnel.
Employee performance
evaluation.

Management Decisions
Escalation of Commitment:
Poor judgment is exercised by smart people unknowingly for
many reasons including availability of information,
representativeness, anchoring and adjustment, confirmation,
overconfidence, and escalation of commitment.

Developing and Evaluating Alternative Decisions


Better management of personnel, risk, and communications
BP should have taken responsibility for the oil rigs
maintenance.
Chose best option instead of an alternative to save time and
costs.
Improving on spill-prevention systems and ensuring rig

Safety and Ethical


Decisions

Expression of Safety concerns to


Management

Neglecting
equipments
again

Pressured
employees not
to report
problems
Cut short inspections to
reduce costs

Safety and Ethical


Decisions

Ken Abbott
Former BP Oil industry
Manager

Fired for Raising Safety Concerns!

Safety and Ethical


Decisions

Listen to Employees

Focus on following
safety operations
frequently

Safety and Ethical


Decisions
Listening to Employees and following safety
procedures

Oil Spill of 2006 in Alaska Caused on aging pipes

Safety and Ethical


Decisions

Before

After

Safety and Ethical


Decisions

Safety and Ethical


Decisions

Political Decisions
Do we invest in domestic oil
production or continue to depend
on international production?

Homeland Security,
Independence from outside
parties and Responsibility
for a better
Environment/Future.
Do we create policies only
at times of disasters?

Political Decisions
Confirmation Bias
Tendency to seek out information that reaffirms
past choices and to discount information that
contradicts past judgments
Before the Deepwater
Horizon Explosion
The US Government and
Politicians pushed forward
Offshore Drilling:
It was safe
Looked better than drilling
on US Land
Creates Jobs, Revenue, and
Independence

After the Deepwater


Horizon Explosion
US Government failed to
adopt new legislations and
future offshore drilling
regulations because of
revenue disagreements.

Final Thoughts