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The Deep-water Horizon Oil Disaster

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The Deep-water Horizon Oil Disaster

The public traded company addressed in this paper is BP. The London-based company is

a British international oil and gas business. In terms of output, it is one of seven global gas and

oil supermajors and ranks third in consumption. As evidenced by its stakes in the facets of the

industry, comprising trade, extraction, survey, energy generation, refining, marketing, and

distribution, the firm is vertically integrated. Apart from that, it has invested in green energy

technologies such as solar and wind energy generation and biofuels and smart grids. In the early

nineteen hundred, a Company was made as a supplementary of the Burmah to exploit Iranian

finds of oil (Sander 2020). This marked the start of British Petroleum's (BP) era. It was renamed

British Petroleum Company in the mid-1950s. The business increased its operations outside the

Middle East in the late 1950s and was one of the chief corporations to discover oil in the Arctic.

The company bought Standard Oil in nineteen seventy eight, giving the firm a majority position.

The British government began gradually privatizing the corporation, which had previously been

fully state-owned, in the 1980s. In the mid-nineties, it merged with Amoco to establish BP

Amoco plc; then, in two thousand, it acquired Burmah Castrol and ARCO to form BP plc

(Kumar 2019). BP Amoco plc and BP Amoco plc were then amalgamated to establish BP plc. In

the early decade of the millennium, the corporation was an associate in a mutual undertaking in

Russia.

BP was openly responsible for several catastrophic safeties, and environmental disasters

are well acknowledged. Following a nineteen ninety-five explosion that killed fifteen workers.

Other notable incidents include the biggest oil leak in Alaska, which ensued in a twenty five

million dollar public fine, the highest per-barrel punishment for an oil leak at the time. This
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report will detail the circumstances surrounding the occurrence, the financial and legal

consequences, and the company's response, as well as any recommendations.

Statement of the Hurdle and Background

The Deepwater Horizon oil rig burst in Mexico, murdering ten employees and injuring

eleven more. Two days after the rig's collapse, the oil leaked into nearby rivers through a

ruptured pipe beneath the rig. The court determined that oil continued to flow from the pipe for

another 87 days, releasing an estimated 377,600 metric tonnes of oil (Oudhuis & Tengblad

2018). The leak resulted in long-term environmental deterioration and economic hardship for

Gulf Coast towns. Since the Gulf of Mexico's discovery in the early 1930s, natural gas and oil

firms have been drilling for fuel. Today, the region produces about a quarter of the country's

natural gas and oil. Oil was created millions of years ago beneath the ocean floor from organic

waste trapped underground, including animal and plant remains. The molecules of these organic

compounds were converted into hydrocarbons, which are carbon-hydrogen compounds that serve

as the building blocks of natural gas and petroleum due to the heat and pressure. Gas and oil are

trapped underground during the gas and oil extraction process in pockets and gaps between tens

to hundreds of feet thick layers of rock, referred to as "pay zones." Since the decade's start,

energy corporations have drilled more than 1900 oil wells in the area (Murawski et al. 2020).

Since January 2001, the business has leased the rig from Transocean, to conduct oil exploration.

BP recruited Halliburton, to explore and run the drilling rig.

In the end, the Horizon tragedy was triggered by a series of preventable mistakes made

by troops and engineers while conducting and designing a borer proposal in the hours and weeks

preceding the accident. President Obama received the conclusions of a 2011 investigation by the

State Commission on Offshore Drilling and the BP Oil Spill – an independent team of scientists,
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legislators, and engineers tasked with determining the cause of the oil spill and explosion.

Deepwater Horizon crew members were 4,900 feet above the ocean's surface and were forced to

make judgments based on data from underwater sensors while still in the water. The team had to

fight with massive steel pieces and flammable oil as part of an unpredictable natural system.

Additionally, the project was managed by many subcontractors and contractors, which increased

the likelihood of miscommunications and misunderstandings. The oil rig was relocated to the a

well in early 2010 from its former site in the Gulf of Mexico. During the first week of April

2011, the rig's staff was mobilized and prepared to carry out three procedures necessary before

oil could be reliably extracted from the Macondo Prospect (Hazen 2020). These activities

included the following: They would begin by drilling into base and putting a steel conduit into

the shaft, gently removing the drilling rig from the well and replacing it with a cheap and smaller

fabrication rig capable of extracting oil often before sealing the tube with cement. The crew grew

increasingly aware of the problems as the drilling technique continued. Due to intense pressure,

BP was forced to halt digging into the seabed, which was approximately 1999 feet deeper than

originally anticipated. The hole must next be lined with a casing, a concrete pipe that functions

as a barrier, preventing the hole from collapsing throughout the drilling operation. Even though

computer models indicated that a shorter casing would be more efficient and safer to install, the

corporation eventually chose a longer shell with a lower leakage rate. To secure the casing,

concrete would be pumped into the area between the surrounding Earth and the casing. As a

result, the concrete must surround the casing to serve this function; otherwise, oil pouring into

the casing may cause the casing to become weak and destabilized. Centralizers, which are metal

tubes with protruding metal strips on either side, are used to ensure a snug, even fit. Engineers do

this through the use of centralizers. BP engineers chose to install only six centralizers in the
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casing due to a supply shortfall, although computer models projected a total of 21 centralizers

should be installed. As a result of this element, the chance of the cement adhering unevenly to

the casing rose.

After installing the centralizers and casing, it was time to begin pouring the concrete. At

this point, BP engineers considered a variety of hypothetical scenarios, each of which raised the

probability of an error occurring. Pre-cementing tests were shortened to avoid professionals

evaluating the well's bottom for signs of oil leakage; they were also lowered in quantity, which

reduces the danger of lost oil but increases the likelihood of contamination due to increased

casing exposure. They pumped the cement more slowly than necessary, increasing the likelihood

that the cement did not fill the space surrounding the casing. In the months preceding the

disaster, the company Halliburton did multiple evaluations that suggested that the type of cement

employed was not stable, resulting in fissures that allowed gases and liquids to seep through.

Halliburton alerted BP of some of these test results, but the business chose to proceed

nevertheless.

On April 20, shortly after midnight, the team, which included executives from Haliburton

and Transocean, completed the cementing procedure. Representatives from Halliburton and BP

were present at this stage to ensure that the pressure generated by the cement would not force an

excessive amount of liquid up through a valve. Several hours later, the officials emailed

members of their separate teams to check on the progress of the cementing operation. The

operation went catastrophically wrong during the penultimate stage when the crew attempted to

disconnect Deepwater Horizon from the well to make place for a smaller rig. Crew members

conducted negative and positive pressure tests multiple times throughout the procedure to

confirm that no gas had leaked into the well. Their inability to discover the leak should have
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been indicted by the negative pressure test, but the results were misconstrued. The personnel

determined that everything was in functioning order. Since gaseous hydrocarbons reached the

well and created the leak, there had been an overlook here.

When gaseous hydrocarbons enter a well, they expand to fill the gap, forcing the pipe to

"kick" upward, as happened with the oil rig in April 2010. The team eventually succeeded in

disabling the blowout preventer, which prevented expanding molecules from ascending the well

and onto the rig, but it was too late. After a while, the molecules' climb of the pipe became more

vigorous, and the ascending gases pushed debris and muck out onto the drilling rig's floor.

Within minutes, the gaseous hydrocarbons had engulfed substantial portions of the rig. They

collided with at least one ignition source, resulting in an explosion that witnesses reported could

be seen from miles away. Eleven workers were reported missing three days after the incident and

are assumed dead. On Earth Day, a globally recognized day dedicated to environmental

preservation, the whole Deepwater Horizon rig capsized one day after the explosion. As a result

of the rig sinking, the pipe heading down to the well was damaged. Oil began to pour from the

well within minutes and continued for the next 87 days(Hazen 2020). The Deepwater Horizon oil

leak is widely regarded as the worst marine oil disaster in history, surpassing the Deepwater

Horizon oil spill in 2010. During the legal proceedings that ensued, it was determined that 3.1

million drums of oil were leaked into the Gulf , accounting for more than half of the oil produced

daily by the US in that region at the period of the tragedy(Moore-Nall 2021). In the US, the

whole event was shown live on television. By June, more people opposed than praised the

government's plan to increase offshore gas and oil drilling in US waters - a sea change in civic

attitude that continued only a few months before being reversed. In the period after the leak and

explosion, scientists and conservational leading responders used a variety of efforts to mitigate
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the ecosystem's damage. They set fire to surface oil to accelerate the breakdown process; sprayed

dispersants to aid microorganisms in dissolving it; created undersea chambers to collect leaking

oil, and encircled the oil with floating booms to prevent it from spreading farther. BP attempted

to plug the well three times before shutting it down in September 2010.

While specialists are still determining the degree of the damage, they agree that it is

significant and long-lasting. Immediately after the disaster, news websites were flooded with

images of turtles and other creatures saturated in oil. Oiled animals may perish due to their

inability to swim or fly, which exhausts them and makes them vulnerable to predators. The oil

had a detrimental effect on every crab species in the Gulf and resulted in the deaths and injuries

of several whales and dolphins. Animals can ingest oil either through their orifices or skin. This

is detrimental because hydrocarbons, more specifically polycyclic, are toxic to animals, making

this a potentially fatal condition.

The disaster has repercussions throughout the economy, with the Gulf Coast suffering the

most severe effects. As a result of the accident, the government announced a five-month

moratorium on offshore deepwater drilling. The suspension resulted in several jobs and a wage

cut, primarily in Florida. On the other side, due to the tragedy, earnings and employment surged

in oil-rich areas of Louisiana, the state nearest to the spill. Concerns over seafood safety

prompted the suspension of fishing in the months following the accident; at one time, 35% of

national seawaters in the Mexican Gulf were restricted. According to a study published in the

journal Deep Oil Spills in 2019, the leak damaged almost 27,000 employment opportunities. It

resulted in a $2.4 billion loss of industrial production for the commercial and recreational fishing

industries (Moore-Nall 2021). Tourists postponed vacation plans, resulting in declining revenue
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for Gulf Coast businesses such as fishing charters, restaurants, and hotels. By 2011, tourism had

recovered, in part due to incentives offered by the oil industry to tourists to the impacted areas.

The Stakes to the Company

Legal

BP Exploration and Production Inc. Pleads Guilty to Crimes Involved in the Deepwater

Horizon Explosion and Is Sentencing to a Record $3.9 Billion in Penalties. The Court accepts the

defendant's guilty plea to Obstructing Congress, Environmental Crimes, and Felony

Manslaughter. The first stage is to impose a Historic Sentence. BP Production and Exploration

Inc. were sentenced to pay a total of $3.9 billion in criminal penalties and fines following its

guilty pleas to 14 criminal charges stemming from its illegal activities leading up to and during

the 2010 disaster. This is the largest criminal settlement in US history. According to the attorney,

the sentence and guilty plea constitute a significant step forward in the Justice Department's

continued efforts to pursue justice for those harmed by one of the nation's biggest environmental

disasters. This historic agreement, which totals about $3.9 billion in consequences and is the

single main wrong settlement in record, thrilled the attorney, who expressed joy that a large

amount of the money will right help Gulf Seaside citizens in their rebuilding and recovery

efforts. According to him, the Deepwater Horizon disaster was a national tragedy that caused

massive environmental devastation and the deaths of 11 people. He continued, as a result of the

Task Force's thoroughness, BP obtained reasonable compensation for its actions. The Justice

Unit stated that it would closely monitor BP's obedience with the petition settlement conditions,

which include adhering to the commendations of two recently mounted observers, cooperating

fully with the unit's continuing felonious enquiry, and implementing improved security

procedures. If BP violates the deal's conditions, the government will respond swiftly and
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forcefully. BP's guilty plea was accepted, and the penalty was subsequently imposed.

Throughout the sentencing process and subsequent guilty plea, the Judge determined, among

other things, that the significant fines imposed as part of the plea agreement significantly exceed

any previously imposed in the United States and are structured in such a way that BP bears the

full brunt of the penalties. Additionally, it is critical to emphasize that the agreement acts as a

strong deterrent and establishes a reasonable penalty by requiring stringent monitoring and

drilling protections and other unique and stringent probationary terms that will ensure BP's future

behaviour is closely monitored. BP accepted all allegations included in information filed in the

US District Court after a settlement with the United States Department of Justice. These

allegations included a criminal act blockade of Legislative body charge, abuses of the Unpolluted

Water Act and the Treaty of migratory Bird Act, as well as 11 counts of felony manslaughter. BP

said in its guilty plea that two of its top administrators aboard the rig made irresponsible

judgments that culminated in the oil disaster and the deaths of 11 people. Additionally, the

corporation asserted that on that sunset, the site managers noticed undeniable proof that the well

was hazardous and that gas and oil were leaking into it but decide on not to take essential and

obvious precautions to safeguard themselves and their colleagues. Furthermore, BP admitted that

the conduct of the Well Spot administrators contributed to the well's loss of control, which

eventually culminated in the disaster. Furthermore, BP revealed after its guilty plea that a top

executive attempted to hinder a congressional investigation into the volume of oil pushed into the

Gulf during the tragedy. Additionally, a senior executive at BP self-confessed to withholding

documents, providing untrue and deceptive data in reply to a US House of Representative's

appeal for flow-rate data, manipulating in-house approximations to belittle the quantity of oil

rolling from the well, and withholding figures that refuted BP's open approximation of over 4800
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drums of oil per day. While the senior executive created inflated statistics, BP's engineering

response teams used sophisticated methodologies to give substantially higher estimates than the

senior executive's. Independent experts and the government eventually confirmed that, contrary

to BP's testimony before Congress, moreover 59000 barrels per day were leaking into the Gulf

during the period in question. According to the Judge's Sentencing, which was included in the

plea agreement, the Gulf region will directly profit from the settlement to the tune of more than

$2.1 billion. Approximately $2.5 billion of the criminal recovery will be used to conserve the

Gulf of Mexico's coastal and marine environments, wildlife, ecosystems, birds, and habitat that

have been harmed as a result of the oil leak – in talk with the suitable state and other supply

administrators (Gyo Lee et al. 2018). Additionally, a share of the retrieval will be used to rebuild

large barricade islands and river alteration systems off the shoreline, significantly improving and

benefiting sea marshlands destroyed by the oil leak and providing a significant benefit to the

general public. An additional $350 million will be invested in oil spill response and prevention

operations in the Gulf of Mexico through training, education, development, and research to

improve oil spill response and prevention operations. Apart from that, BP was sentenced to five

years of test, the extreme allowed under the act. The corporation is also obligatory to maintain a

risk management monitor, practice welfare and hazard supervision, and boring gear repairs in

connection with subterranean sea boring in the Gulf, according to the court order issued as part

of the plea agreement. Additionally, BP must retain an independent ethics monitor to help the

firm strengthen its code of conduct and guarantee future transparency with the US government.

Individuals arrested or charged with crimes in other cases are assumed innocent unless and

unless proven guilty. The ongoing criminal investigation into the April 2010 Gulf oil disaster by

the Deepwater Horizon Task Force concluded on Monday with the announcement of a guilty
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verdict and the entry of a guilty plea. Among those on the task force are representatives from the

US Counsel's Office for Louisiana and the FBI, as well as DAs from the Division of Justice's

Division, as well as prosecutors from other US Attorney's Offices; environmental protection

agency investigators; Department of Interior and Environmental Protection Agency investigators.

Financial

BP has been sentenced to pay US $5.5 billion in civil damages to catastrophe victims due to the

tragedy. The total cash will be distributed over sixteen years. As a result, the company will pay

$8.1 billion in natural resource damage. An additional six hundred million dollars in other

claims, including False Claims Act, claims, reimbursement and royalties for costs associated

with natural resource damage assessment and other incident-related expenses, up to an additional

seven hundred million dollars in future natural resource injuries, and a $5.51 billion Clean Water

Act fine were to be paid by the company. The firm will pay more than twenty billion dollars in

total, including the associated deal, which requires BP to pay more than $5.8 billion to states and

local governments. This will be the country's largest single federal law enforcement settlement.

Company Actions

There are several actions that the oil giant addressed following the aftermath of the incident. The

company was battling renegade exploration well spewing oil into the Mexican Gulf eight years

ago. Tarballs eroded aground on the Texas shoreline. A fleet made several attempts of vessels to

put fire on the oil. It was a sight to behold for geologists and engineers, as well as a sizable

portion of the general public who tuned in to see the lit up against the black ocean bottom by

submerged automatons. It appeared as though the firm's essence was spilling out of the ground

and into the ocean's depths. BP, on the other hand, has remained solvent.
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The Deepwater Horizon drilling rig disaster in 2010 killed 11 workers and "shook the industry to

its core." BP has liquidated $76 billion in assets in the aftermath of the catastrophe to meet the

costs of excessive government lawsuits, private damage claims, and fines, among other things. In

recent years, it has laid off two senior executives, retooled facilities, and reaped the rewards of

both the ups and downs in crude oil prices (Gyo Lee et al., 2018). It is now investing profitably

in large-scale natural gas and oil projects, including wells off the coast of Egypt and a Caspian

gas pipeline, to expand its market share. The business has expanded in size. The organization has

grown more compact and streamlined compared to its previous state. The corporation divested

certain unproductive properties, frequently at extravagant prices, and as a result, it now operates

a leaner but more powerful business than it did previously. At one point, BP's long-term viability

was questioned. BP's decision to discontinue the equity dividend sparked enormous outrage

throughout the United Kingdom, as the firm was responsible for a substantial portion of

payments provided to other retirement schemes and pensions. The Obama administration faced

pressure from across the country to shut down the corporation by delaying offshore drilling

licenses or imposing even harsher fines. The corporation continues to operate despite this.

Following a series of disasters, comprising a massive plant blast in Texas, BP gradually updated

its amenities and empowered workers to halt operations if concern to public safety exists. BP

aggressively liquidated its assets in reaction to a barrage of litigation, and as a result, the

corporation ended up earning the profits of great unrefined oil rates. It divested storage

amenities, pipelines, and other structures while maintaining the ability to continue exploration

and production. The board elected to maintain refining and marketing operations despite

consultant advice, which provided a buffer against the subsequent oil price collapse. BP, on the

other hand, resumed expansion ambitions only recently. Consider the following as an illustration
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of the enormous size of the gas and oil industries: According to BP, the business produces is

approximately 11% less oil than it did before the accident but still more than the majority of

Petroleum Trading States members.

The company's output increased by 11% last year and is projected to grow (Gyo Lee et al. 2018).

As a result, BP has cut exploration costs by 47 per cent while increasing output, including off

coast of Ivory Coast and Brazil. BP has maintained its commitment to the Gulf of Mexico's deep

oceans. Its net production of oil and oil equivalents increased to 305,000 barrels per day in 2017,

a 21 per cent increase over the previous three years but still a far cry from the volume produced

before the 2010 disaster (Rothacher 2021). Apart from that, the corporation owns an undefined

amount of land in the area. This year, oil extraction from declining British North Sea fields will

be enhanced to quadruple output in five years. Numerous efforts are concentrated on natural gas.

The company began producing significant amounts of shale gas last year from approximately

201 wells in Oman and intends to continue doing so. It hopes to enhance condensate making off

the shore of Egypt by the end of this year. Russia has long been its crown jewel despite the

corporation's global reach. In 2003, Total devoted about $9 billion in TNK-BP, a shared project

between BP and Total. The company made billions of dollars in earnings due to its contentious

relationship with its Russian partners (Rothacher 2021). BP ultimately sold its stake in the

company to Russian oil giant Rosneft for nearly four times its spending. According to the

corporation, BP obtained a 19.5 per cent stake in the company in exchange. According to the

firm, dividends from Rosneft were 7.5 per cent of BP's pre-interest and pre-tax revenue in 2017.

What they did well

BP responded swiftly and unequivocally to the incident. Oil skimming vessels and personnel of

the company's crisis response team were on the scene in less than two hours. What was even
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more stunning was BP America Chairman Bob Dudley's prompt response. He informed reporters

during a widely publicized press conference on the tainted breach that the company's lawyers had

assured him that we were not responsible for the issue. On the other hand, he believes that the

corporation is to blame, and they will respond as if we are. The cleanup was straightforward and

quick. I was taken aback. Following the catastrophe, BP agreed to pay over $20 billion in

damages and penalties, with a sizable portion of the money going toward a massive study and

restoration effort in the afflicted area, among other things. The vast majority of funds were

directed toward economic and ecological rehabilitation, with the remaining for other purposes.

Despite the Deepwater Horizon accident, it appears as though Gulf of Mexico gas and oil

production will proceed as usual. Indeed, oil output on a global scale is expanding. The

organization's energy inertia is being recovered due to these corporate actions.

What they did poorly

Following the incident, it led to establishing a $20 billion compensation fund for spill victims.

Around one-third of the fund was distributed a year after the catastrophe, even though a lack of

control allowed government departments to submit substantially inflated claims, some of which

were unrelated to the leak. BP acted swiftly to liquidate its assets to maintain profitability in a

barrage of lawsuits. The company made a mistake in the process, selling its old Permian Basin

holdings in Texas during the height of the shale drilling boom, changing an older conventional

field into a hot new shale possibility. As a result, the corporation will need to delve deep into its

finances to re-establish a presence in the neighbourhood. According to a news statement, the

company has agreed to pay $11 billion for most of its onshore natural gas and oil holdings in the

United States, including those in the highly sought-after Permian Basin. The transaction
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positioned the London-based energy giant in the Permian Area, the world's fastest-growing

substantial oil basin, but at a great cost to the corporation.

How to handle it different

BP's objective is to convince the public that the Gulf of Mexico is self-recovering after some

time has passed. BP published public relations materials showcasing the Gulf's resilience on

January 1, 2015. The materials included scientific evidence confirming the region's rapid

recovery. On the other hand, animals in the Gulf of Mexico appear to be struggling five years

after masses of gallons of oil leaked into the waterway. The crisis management team at BP's

response will go down in history as one of the most stunning examples of how a disaster can

escalate out of control due to inadequate communication. Likewise, a comparable circumstance

could have been handled differently. During times of crisis, I will ensure that ethical concepts

such as responsibility and accountability are included in company decisions. Empathy for

victims, honesty, and transparency will all be tempered in this process. It is critical to managing

the crisis and all parties engaged in a disaster of this magnitude.

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References

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after the Deepwater Horizon oil spill. Journal of Corporate Accounting & Finance, 29(1), 69-79.

Hazen, T. C. (2020). Lessons from the 2010 Deepwater Horizon accident in the Gulf of Mexico.

Hydrocarbons, Oils and Lipids: Diversity, Origin, Chemistry and Fate, 847-864.

Kumar, B. R. (2019). British Petroleum Merger with Amoco. In Wealth Creation in the World’s

Largest Mergers and Acquisitions (pp. 217-222). Springer, Cham.

Moore-Nall, A. L. (2021). Issues Related to Water Affecting Indigenous Peoples of North

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Murawski, S. A., Hollander, D. J., Gilbert, S., & Gracia, A. (2020). Deepwater oil and gas

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Oudhuis, M., & Tengblad, S. (2018). BP and deepwater horizon: A catastrophe from a resilience

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