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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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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"What BP experienced was a perfect storm, where aging infrastructure, overzealous cost-cutting, inadequate design and risk-blindness, all converged."¹

- Carolyn Merritt, Chairman of the U.S. Chemical Safety and Hazard Investigation Board,² in 2006.

"Based on its review, the Panel believes that BP has not provided effective process safety leadership and has not adequately established process safety as a core value across all its five U.S. refineries. While BP has an aspirational goal of "no accidents, no harm to people,"BP has not provided effective leadership in making certain its management and U.S. refining workforce understand what is expected of them regarding process safety performance."³

- The Report of the BP US Refineries Independent Safety Review Panel, January 2007.

"We will use this report to enhance and continue the substantial effort already underway to improve safety culture and process safety management at our facilities... I intend to ensure BP becomes an industry leader in process safety management and performance."⁴ ⁵ ⁶

- Lord John Browne, CEO, BP Plc., in January 2007.

Bp - Green or Mean?

On January 16, 2007, the BP US Refineries Independent Safety Review Panel issued its report (popularly known as the Baker report) on its review of safety issues in BP Plc.'s (BP) refineries in the US. BP, the world's third-largest oil and gas producer after Exxon Mobil Corp.⁷ (ExxonMobil) and Royal Dutch Shell⁸ (Shell), had been plagued by safety lapses in its facilities in the last couple of years.⁹ The panel was formed in October 2005, after The US Chemical Safety and Hazard Investigation Board (CSB) had uncovered many safety lapses at BP's Texas City refinery during the investigation of an explosion that occurred on March 23, 2005, which had resulted in 15 deaths and 170 people being injured.¹⁰

CSB said that BP might have endangered its workers by compromising on process safety and because of its emphasis on cost cutting.

Calling into question BP's safety culture, CSB recommended that BP should form an independent review panel to review the safety of its five refineries in the US.

The 11-member panel, which was headed by former US secretary of state, James A Baker III (Baker), was critical of BP's safety culture and the leadership demonstrated by BP's top management with regard to safety issues. The chairman of CSB, Carolyn W. Merritt (Merritt) agreed with this finding when she said, "Safety culture is created at the top, and when it fails there, it fails workers far down the line. That is what happened at BP."¹¹

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1] "Cost-cutting led to BP Refinery Fire, Report Concludes,"www.pbs.org, November 01, 2006.

2] The US Chemical Safety and Hazard Investigation Board, headquartered in Washington, USA, is a federal agency that is responsible for conducting investigations of industrial chemical accidents in the US.

3] "The Report of the BP US Refineries Independent Safety Review Panel,"www.bp.com, January, 2007.

4] The UK Health and Safety Commission defines safety culture as "the product of individual and group values, attitudes, perceptions, competencies, and patterns of behaviour that determine the commitment to, and the style and proficiency of, an organisation's health and safety management."(Source: www.en.wikipedia.org)

5] To help assure safe and healthful workplaces, US Occupational Safety and Health Administration (OSHA) has issued the Process Safety Management of Highly Hazardous Chemicals regulations which contain requirements for the management of hazards associated with processes using highly hazardous chemicals.

6] "BP Safety Standards 'Wholly Inadequate',"www.inthenews.co.uk, January 16, 2007.

7] Exxon Mobil Corporation, headquartered in Irving, Texas, USA, is the largest publicly traded integrated oil and gas company in the world.

8] Royal Dutch Shell Plc., headquartered at The Hague, The Netherlands, is the world's second largest oil company.

9] "BP Surprises by Naming Successor for CEO Early,"www.taipeitimes.com, January 14, 2007.

10] "Safety at Oregon's BP Plant,"www.13abc.com, January 17, 2007.

11] Sonja Franklin, "BP's Browne Failed on Refinery Safety, Panel Reports (Update 5),"www.bloomberg.com, January 16, 2007.