BP: Putting Profits Before Safety?

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Case Details:

Case Code : BECG071
Case Length : 21 Pages
Period : 2005-2007
Pub Date : 2007
Teaching Note : Available
Organization : BP Plc.
Industry : Oil and Chemical
Countries : USA, Europe

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Background Note

BP was formed in 1998 as a result of the merger between British Petroleum and Amoco Oil Corporation (Amoco). However, the origin of BP can be traced back to 1901, when William Knox D'Arcy (D'Arcy), an Englishman, obtained a concession from the Shah of Persia to explore for oil in the Middle East. When D'Arcy failed to locate any oil deposits despite having incurred huge costs on his explorations, the Burmah Oil Company came to his rescue in 1905. In 1909, oil deposits were discovered in South West Persia, which marked the founding of the Anglo-Persian Oil Company (APOC). During that time, Burmah Oil Company held 97 percent of the company's ordinary shares...

Tragedy in Texas

On March 23, 2005, there was a devastating explosion at BP's Texas City refinery, the third largest refinery in the US. This accident was one of the most serious workplace disasters in the US as it had resulted in 15 deaths and more than 170 being injured. The accident occurred when the workers started the refinery's octane-boosting unit. Excess gasoline spilled into a vent system and ignited, setting off an explosion that was felt within a five-mile radius...

Alarm in Alaska

BP's image was also affected in early 2006, when leaks were found in its oil pipelines at Prudhoe Bay, Alaska, the largest oil field in the US. On March 2, 2006, a BP worker discovered a large oil spill in western Prudhoe Bay. It was estimated that at least 267,000 gallons had spilled out, making it the largest oil spill on Alaska's North Slope. The spillage was due to a corroded transit pipeline. The spillage brought back memories of the infamous Exxon Valdez Spill in Alaska, and led to a public outcry against BP...

Other Problems

Apart from the safety lapses, BP also had to deal with several other problems. Its US trading unit was accused of artificially driving up the prices of propane in 2003 and 2004. In December 2006, US regulators threatened to press civil charges against BP after an investigation into allegations of market manipulation of the gasoline futures market. BP was also struggling to increase its production levels. On January 09, 2007, BP said that oil production had reduced for the sixth consecutive quarter due to the shut down of its facility in Alaska and delay in opening of new fields in the Gulf of Mexico...

BP Springs a Surprise Ahead of the Baker Report

On January 12, 2007, BP announced that Browne would step down in favor of Hayward by the end of July 2007. Browne had been expected to stay until the end of 2008. Browne's early departure came as a surprise as he had been credited with transforming BP into a major player in the industry with a series of M&A deals. He had also given BP a new image as a company that was concerned about the environment, long before any of its competitors had done so...

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