Its been more that two years since the tragedy of the Deepwater Horizon incident costing the lives of some of its crew, damage to the environment besides the strain on the lives and livelihoods of individuals living in US states along the Gulf coast.
There appears to be a return to business as usual oil production has improved in the Gulf of Mexico. BP the defendants in this case have moved from "beyond petroleum" to above suspicion recently rewarded by the financial markets with a share price increase for negotiating £4.9 million in damages with victims. Policymakers and the industry have opted for more compliance focused on safety and environmental dimensions of performance which will necessitate the need for more audits and auditors. An uneasy hush has fallen as the incident slowly fades from the headlines and the collective memory of the public. A scenario that seems oddly familiar....Background
Dr. Tony Hayward was appointed CEO of BP after the less than savory departure of Lord Browne his mentor and predecessor. As CEO he promised to focus on safety "like a laser" knowing full well as a BP insider the spate of safety incidents that occurred prior to his appointment at their Texas city refinery in 2004 - 2005, the near sinking of the Thunder-horse platform in the Gulf of Mexico, oil spill in Alaska in 2006 and US Labor Department fines for safety violations at its Toledo refinery in 2006.
Tony Hayward a geologist by profession also adopted a strategy of doing more with less by immediately cutting over 5000 jobs early in his now fateful tenure. This decision to cut jobs may have made an accident like Deepwater Horizon predestined. To his credit he instituted risk management training for executives at BP's "Operations Academy" at MIT and established the company's Operations Management System (OMS) which although innovative now seem painful inadequate.
Quality Failure
The Chartered Quality Institute defines quality management as "an organisation-wide approach to understanding precisely what customers need and consistently delivering accurate solutions within budget, on time and with the minimum loss to society". This inclusive understanding of quality especially minimizing loss to society was not understood by Tony Hayward and BP's senior management. The company cautioned employees against having uncovered cups of hot beverages but no procedure for the "negative pressure test" critical in terminating drilling operations.
The question may be asked... was the Deepwater Horizon fit for purpose?
As a drilling platform the Deepwater Horizon was state of the art; built by Hyundai at a cost of $365 million, it was a unique combination of ship and drilling package. Operated by a crew of 160 it was kept relatively motionless when at sea by four metal pontoon legs and GPS positioning systems. At the time of construction its 28000 tonne drilling package set a world record for the heaviest object ever lifted.
Despite state of the art equipment the Deepwater Horizon as with other platforms had an Achilles heel it was the absence of a quality culture within the oil and gas sector which traditionally has been dominated by a risk taking attitude necessary for oil and gas exploration.
This absence of a quality culture gave rise to the following quality failures leading to the explosion aboard the Deepwater Horizon:
1. Incorrect parts - centralizers key equipment used in drilling operations were received from supplier not to specification
2. Breach of existing well design - to little centralizers used in operations 6 instead of 21 - a casualty of the misdirected focus on reducing cost not reducing the cost of quality
3. No Product verification - incoming inspection tests were not conducted on the cement foam upon receipt from the supplier Haliburton
4. Poor Supplier Management - cement supplied by Haliburton failed in-house tests. The need to develop mutually beneficial supplier relationships is a corner stone of total quality management and quality management standards such as the ISO 9001. BP's relationship with their supply chain Transocean and Haliburton as events has revealed can be described as combative at best.
5. Poor Process Management - "Negative Pressure Test" was not on the platforms work plan. There was no procedure for conducting the "Negative Pressure Test"
6. No Management of Change Procedure - Negative Pressure Test added to the work plan at the "eleventh hour". This confusion led to the acceptance of one positive test result despite three failed negative pressure tests a decision that sealed the fate of the crew of the Deepwater Horizon.
These 6 quality failures resulted in catastrophic loss of life and environmental disaster- the safety consequence - a cost we can only estimate.
The cost to BP for the absence of a quality culture has been a $91 billion loss of market value between April - June 2010, over 350 lawsuits from the general public, damage to its brand image, loss of support from environmental groups with the US Audubon Society "largest uncontrolled science experiment in our country", shareholder dissatisfaction and loss of industry leadership.
Safety is not the issue it is a lack of an understanding of quality and its impact on the triple bottom-line economic, social and environmental. Its time for BP, the oil and gas industry and regulators to adopt an industry-wide approach that embraces continuous improvement that goes "beyond quality"
The question may be asked... was the Deepwater Horizon fit for purpose?
As a drilling platform the Deepwater Horizon was state of the art; built by Hyundai at a cost of $365 million, it was a unique combination of ship and drilling package. Operated by a crew of 160 it was kept relatively motionless when at sea by four metal pontoon legs and GPS positioning systems. At the time of construction its 28000 tonne drilling package set a world record for the heaviest object ever lifted.
Despite state of the art equipment the Deepwater Horizon as with other platforms had an Achilles heel it was the absence of a quality culture within the oil and gas sector which traditionally has been dominated by a risk taking attitude necessary for oil and gas exploration.
This absence of a quality culture gave rise to the following quality failures leading to the explosion aboard the Deepwater Horizon:
1. Incorrect parts - centralizers key equipment used in drilling operations were received from supplier not to specification
2. Breach of existing well design - to little centralizers used in operations 6 instead of 21 - a casualty of the misdirected focus on reducing cost not reducing the cost of quality
3. No Product verification - incoming inspection tests were not conducted on the cement foam upon receipt from the supplier Haliburton
4. Poor Supplier Management - cement supplied by Haliburton failed in-house tests. The need to develop mutually beneficial supplier relationships is a corner stone of total quality management and quality management standards such as the ISO 9001. BP's relationship with their supply chain Transocean and Haliburton as events has revealed can be described as combative at best.
5. Poor Process Management - "Negative Pressure Test" was not on the platforms work plan. There was no procedure for conducting the "Negative Pressure Test"
6. No Management of Change Procedure - Negative Pressure Test added to the work plan at the "eleventh hour". This confusion led to the acceptance of one positive test result despite three failed negative pressure tests a decision that sealed the fate of the crew of the Deepwater Horizon.
These 6 quality failures resulted in catastrophic loss of life and environmental disaster- the safety consequence - a cost we can only estimate.
The cost to BP for the absence of a quality culture has been a $91 billion loss of market value between April - June 2010, over 350 lawsuits from the general public, damage to its brand image, loss of support from environmental groups with the US Audubon Society "largest uncontrolled science experiment in our country", shareholder dissatisfaction and loss of industry leadership.
Safety is not the issue it is a lack of an understanding of quality and its impact on the triple bottom-line economic, social and environmental. Its time for BP, the oil and gas industry and regulators to adopt an industry-wide approach that embraces continuous improvement that goes "beyond quality"
