EBUS 534
Assignment 2: Deepwater Horizon
Introduction
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This essay is all about the incident that
happened on the night of the 20th April 2010 when an oil drilling
rig called Deepwater horizon was in operations in the Macondo prospect in the
Gulf of Mexico and exploded due to poor management decisions, human error and
equipment failure which result in the
death of 11 workers and began the release of a massive
amount of oil into the Gulf. It is also known as one of the largest
spill of oil in the history of oil drilling operations in the United States because 4 million barrels of oil
flowed from the affected well over a
period of 87 days (Environmental Protection Agency, 2017).
Identification of Key Risk
Since time cost money in project management
world, Deepwater Horizon drilling project
was several days behind schedule and the pressure to get the job done as soon as possible played a miserable
role in the disastrous incident. According to movie Deepwater Horizon (2016),
Apart from human error and equipment failure,
there were several risks that management overlooked before performing the final
disastrous test. Management sent team 1 home without doing cement bond log test
and it was so important because it was the only thing in between the safety of
the employees and blowout. In that situation compromising on cement log test means compromising on whole
drilling infrastructure. Even after getting unsatisfactory results from the gauge
of drill line and kill line they
performed the final test without analysing its impact on employee’s security
and safety.
Risk Breakdown Structure
Level 0
Level 1
Level 2
Level 3
Project Risk
Technical
Performance
Equipment may not be fit for purpose.
Quality
Available materials may be of insufficient
quality
Safety
Safety may not be considered in design
Management
Project Management
Miscommunication
Inaccurate estimates may cause
overspends etc.
Organization
Decision Making
Making decisions without analysing its
impacts.
Qualitative and
Quantitative assessment of the Risk after the incident.
Considering the number of potential risks that arise
in any project, Every Project or risk manager faces a series of troubles. How can you manage a project without spending time
on managing all the possible risks but you can’t address all levels risk every time.
For this purpose, Risk managers do a qualitative and quantitative analysis to
find out which risk need more prioritization and consideration and which risk
need to address first.
Level Name
Ranges
Description
Low
0-39%
If something would end up being nothing more
than just a bother and easily manageable.
Medium
40-79%
A difficult but manageable situation.
High
80-100%
If something blowout budget or delay project
substantially.
Risk
Category
Assessment
Response
Probability
Impact
R1) Upcoming tenders
and contracts will be hard to get because of the Incident.
Market
High
(90%)
High
Management has to overcome
this situation as soon as possible to retain the reputation of the company.
R2) Settlement
payments for the injured workers will disturb financial condition of the
company.
Organization
Medium
(40%)
Medium
Instead of paying in cash directly, the company can give them stock
market shares or bonds of the same company.
R3) Employees will
feel insecure for working with the company in future.
Organization
High
(80%)
Low
Need to introduce new
safety arrangement and have to provide awareness about handling emergency
conditions.
R4) There will be huge
employees turnover in the oil drilling industry.
Industry
High
(80%)
Low
Need to convince current
and future employees in terms of security and safety.
R5) Time cost money so
rehabilitation time may affect the progress of the company.
Organization
Medium
(40%)
Medium
Management has to overcome on this for continuous improvement.
R6) Threat for marine
life
Environment
Medium
(40%)
Low
Need to do some arrangements
for saving marine lives by contacting and cooperating with marine life
authorities.
R7) It will Affect
Seafood and fishing industry.
Industry
Medium
(40%)
Low
Need to do several steps to
prevent water from toxication.
R8) It will affect
tourist industry especially for beaches.
Industry
Low
(10%)
Low
Need to create awareness
among tourists about precautions.
R9) it will cause air
pollution
Environment
Low
(10%)
Low
Need to spray
anti-pollution chemicals in the surroundings.
R10) It will disturb
the Routes of the Sea Transportation
Industry
Low
(10%)
Low
Need to clear the spot of
the incident to open the routes again for cargo and passenger ships.
R11) it will decrease
the interest of the purchaser in real estate business.
Industry
Low
(20%)
Low
————————-
High
R3, R4
R1,
Medium
R6,R7
R2,R5
Low
R8,R9,R10,R11
Occurrence/
Impact
Low
Medium
High
Impact
Risk
Probability %
Impact (Cost)
Overall impact on Budget
R1)
90%
$10 billion
$9
billion
R2)
40%
$30 billion
$12
billion
R3)
80%
$ 10 million
$8
million
R4)
80%
$ 10 million
$8
million
R5)
40%
$ 1 billion
$0.4 billion
R6)
40%
$ 1 billion
$0.4 billion
R7)
40%
$ 0
$0
R8)
10%
$ 0
$0
R9)
10%
$ 10 million
$ 1
million
R10)
10%
$ 0
$0
R11)
20%
$ 0
$0
Number
Risk Prioritization according to its cost
impact or in descending order
Overall impact in terms of cost in case of
happening.
1
R2
$12 billion
2
R1
$09 billion
3
R5
$0.4 billion
4
R6
$0.4 billion
5
R3
$8 million
6
R4
$8 million
7
R9
$1 million
8
R7
$0 million
9
R8
$0 million
10
R10
$0 million
11
R11
$0 million
Discussion
Risk identification is one of the most sensitive
areas in the projects because it requires proper consideration from each and
every point of view.The main sources of the risk could be either internal to
the project or external to the project whereas internal factors of the risk may
arise from people, processes, procedures, organizational culture, managerial
decisions, quality of the equipment etc
(Hilson, 2003).The primary purpose of the risk management is to increase
opportunities and decrease threats by keeping the focus on objectives and goals
of the project (Hillson, 1999).Since Project management is a combination of
teamwork so effective communication plays an important role throughout the life
cycle of the project but Enterprise Technology Projects (2016) mentioned 4 common miscommunication mistakes in
projects and one of them is that we
often think that we have done enough communication within teams to completely
understand the nature of the projects and there is a true fact regarding this
is that no amount of communication is ever enough.When Team 2 arrived at the
site, there was no proper communication in between the Team 1 and Team 2 about
cement bond log test (Deepwater Horizon,
2016). In Risk Management,
before identifying general or overall risks, it is more important to identify
that what events might be risky against which barrier at what stage. There is no
doubt that most probably same nature of the risks impacts on same objectives
which means that technical risk could influence technical objectives and in the
long run these objectives may disturb overall goals of the project (Jaafari,
2001; Hillson, 2005). In Deepwater horizon, one of their technical safety officers told them that 10% machinery on board
is not working properly and may cause hazard during the drilling process but
that won’t help in convincing the management to stop from performing the last test. In some cases, performing risk
analysis or mitigation of risk requires more expenses that result in exceeding the current budget up to
20%, but the main thing is that whether the reduction
in the risk worth the additional expenditure? (Morris et al., 1991). That was the main reason behind not doing
cement log test in Deepwater Horizon, management
was already late for 43 days and they were ahead of almost $50 million more
expenditure because they were confident enough about cement log for more
drilling without testing the capability of its current state. If you want your
decision making to be efficient then there is a need to quantify security and
safety risks to enable risk-based assessments of the effectiveness of
protective measures (Stewart et al.2006; Little 2007). Management at Deepwater
Horizon didn’t expect that sort of disastrous blowout, but again not enough
amount of prearrangements was done to protect the workers from the fire. Deepwater Horizon incident took lives of
11 workers just because of management’s immature behaviour and decision-making process. Dangerous waste and
Environmental hazards will always be a concerned for the growing economies,
because of any disastrous situation, the company
can’t deny allegations as an innocent purchaser defence.
They must clean, and they must pay for all the damages (Smith et al., 2011). The estimated damage cost
to British Petroleum, the environment and the United States Gulf coast economy
was about $36.9 billion dollar. In a nutshell, the business world is all about profit and loss and if investors lost
their money from one project then maybe they find different opportunities in
other projects to get a return on their
investment but the most valuable assets in any organizations are the lives of the employees because we can’t
get it back in case of loss.
References
1.
Environmental Protection Agency (2017) Deepwater Horizon – BP Gulf of Mexico Oil
Spill. Available at: https://www.epa.gov/enforcement/deepwater-horizon-bp-gulf-mexico-oil-spill
(Accessed: 10 December 2017).
2. Deepwater
Horizon (2016) Directed by Peter Berg
Film. Santa Monica, California: Summit Entertainment.
3.
Hillson, D.
(2003), “Using a Risk Breakdown Structure in Project Management”,
Journal of Facilities Management, 2(1), pp. 85-97.
4.
Hillson, D. A.
(1999) Business uncertainty: threat or opportunity? ETHOS Magazine, No. 13,
June/July, pp. 14–17.
5.
Hillson, D.
(2005), “When Is a Risk Not a Risk?”, IPMA Project Management
Practice, 1, pp. 6-7.
6.
Enterprise Technology
Projects (2016) 4 Common Miscommunication
Mistakes In Project Management. Available at:
http://enterprisetechnologyprojects.com/blog/2016/8/25/4-common-miscommunication-mistakes-in-project-management
(Accessed: 11 December 2017).
7.
Jaafari, A.
(2001), “Management of Risks, Uncertainties, and Opportunities on
Projects: Time for a Fundamental Shift”, International Journal of Project
Management, 19, 89-101.
8.
Morris, B. L.,
Strybos, J. W., and Marchand, K. A. (1991) “Minimum hardening measure for the protection of people-intensive
army facilities from exterior explosive attack.” SWRI Project No.
06-2914-700, U.S. Army Engineer District, Omaha, Neb.
9. Little, R. G. (2007). “Cost-effective strategies to
address urban terrorism: A risk management approach.” The economic costs and
consequences of terrorism, H. W. Richardson, P. Gordon, and J. E. Moore,
II, eds., Edward Elgar Publishing, Cheltenham, U.K., 98–115.
10. Stewart, M. G., Netherton, M. D., and Rosowsky, D. V. (2006)
“Terrorism risks and blast damage to building
infrastructure.” Nat. Hazards Rev.,7-3, 114–122.
11. Smith, L.C., Smith, L.M., Ashcroft, P.A., (2011).
Analysis of environmental and economic damages from British Petroleum’s
Deepwater Horizon oil spill. Albany Law Rev. 74 (1), 563–585.
