Sample Case Study on Gulf of Mexico

Gulf of Mexico

Introduction

The Gulf of Mexico experienced oil spill disaster in the month of April in the year 2010. The oil spill was caused by the BP’s Macondo Well, which is a Trans ocean operated BP company. The disaster has been recorded as the largest marine oil spill that caused many deaths. There was an occurrence of an explosion and a subsequent sinking of a deepwater horizon oil rig that caused an oil gusher on the floor of the sea that flowed for eighty seven days. The flow of oil on the gulf was capped in the month of July the same year. According to the government of the US, about 4.9 million barrels of oil were discharged. Attempts to contain the flow of oil proved futile leading to the closure of the well, but some sources have it that the well site still leaks up to date (Bader 82).

The long flow of spills that took months called for responses from different bodies plus multiple cleanup activities. This flow, along with the activities and the responses caused a lot of damage to marine life, fishing, wildlife habitats, and tourism. The oil spill had a great effect on Louisiana and in the year 2013 its beaches were contaminated with several pounds of oily substances. This was about half the amount that was collected in the year 2012. Many crews worked for about four days every week to clean up the spills on the shoreline of Louisiana in the year 2013 (Rochester 98). There was continued discovery of oil in regions far away from the site of Macon do e.g. in the Bay of Tampa and Florida Panhandle. Marine life was largely affected where young dolphins died six times the standard rate.

Investigations were carried out so as to determine the cause of the explosion and the oil spill. In 2011, the government of the US reported on the well’s defective cement that faulted BP and the rig operator. The report also pointed on the contractor as a probable cause of the tragedy. In the same year, a commission also accused BP and BP’s partners of making a series of decisions to cut costs and having a deficient security system. The commission also pointed at systemic causes and absence of reforms from the government and industry practice policies. In the month of November, 2012 there was a settlement of federal criminal charges between the US Department of Justice and BP company. BP pleaded guilty to misdemeanors, manslaughter, and an offense of lying to the congress. BP was to work for four years with the government as its monitor of its ethics and safety practices. BP was also banned temporarily from signing new contracts with the government of US (Rochester 31). In an agreement between BP and the Department of Justice, BP was to pay a fine of $4.525 billion plus other payments. By February 2013, BP had accrued a total cost of $42.2 billion for the settlement of civil and criminal charges. In a ruling by a District court judge in US in 2014, BP was responsible for the spill as a result of its reckless conduct and negligence, and this ruling could attract an additional $18 billion fines to BP.

The magnitude of the oil spill

The oil spill was discovered in April, 2011 when a large film of oil started to spread at the site of the rig. This was accompanied by an eighty seven days period of the flow, with an estimated rate of flow of between 1000 and 5000 barrels of oil per day by BP. This contradicted the flow rate of 62,000 barrels per day, a figure from the Flow Rate Technical Group. The volume of leaked oil averaged a total of 4.9 million barrels. The spills had an impact on 68,000 square miles of the ocean, and by the month of June, the spill had spread to about 125 miles of the coast of Louisiana. Towards the end of June, oil reached the gulf of Park Estates, where it first appeared in Mississippi. By July 491 miles of Louisiana coastline, Alabama, Florida and Mississippi had been contaminated with oil. A total of 1,074 miles had been contaminated with oil since the start of the oil spill (Freudenburg, William, & Gramling 17).

There were concerns about underwater appearance, and dissolved oil plumes. Researchers held that the dissolved oil plumes would remain bounded to the Gulf of Mexico’s northern part. In the month of July surface oil dispelled but subsurface oil remained. Half of the oil was reported to have remained under the surface, meaning that over a hundred million US gallons of oil rested in the region. There was presence of oil at about 200 miles along the coastline of Louisiana in 2012. There was a removal of more than 4.5 million pounds of oiled substances in the coast of Louisiana in 3012, while some contents of tar balls were reported from Florida and Alabama beaches. There were allegations that spilled oil had not yet reached Tampa Bay, there was a later identification of plumes of oil in the region. These plumes were suggested as the causes of lesions in fish in Tampa Bay.

Effects on the environment

The area that was affected by the spill was a host for about eight thousands, three hundred species. These species included fish, mollusks, polychaetes, sea turtles, crustaceans, and marine mammals. The oil spills posed dangers to both marine life and human beings. The concentration of polycyclic aromatic hydrocarbons as a result of the spills harmed marine species directly. There was a 40% concentration of methane gas compared to the normal concentration of 5%. Methane causes suffocation to marine life when depletion of oxygen occurs. Oil spills can release toxins that cause irregular heartbeats in human. These irregular heartbeats eventually cause cardiac arrests. It was discovered that many species suffered cardio toxicity (DesJardins 96). Other species e.g. amberjack developed deformities in different organs including the heart. These deformities were fatal and humans in the region were also exposed to the risk of contracting them.

Some chemicals that formed as a result of the spills were present some in migratory birds, and the eggs from Pelican species were observed to contain some compound of petroleum and Corexit. In 2012 there was a discovery of mutated fish that developed as a result of the oil spill. These included shrimp that were found with neither eyes nor eye sockets. In the year 2013 there was a report that the ecosystem in the gulf was in crisis. The report indicated a reduction in seafood catches and fish were found to have deformities, sores and lesions. The death rate of young dolphins rose to about ten times the usual death rate in the first birthing season. BP officials continually denied the effects in the dolphins as being caused by the spill. They argued that the deaths of dolphins had started being experienced even before the oil disaster.

The oil spill endangered the lives of sea turtles, with the number of stranded turtles rising from one hundred to five hundred after the spill (Landau 77). More than of the dolphins captured around the area were ill or dying. Tar balls continued washing up the Gulf coast causing harsh erosion of the coastal islands. This erosion led to the death of marsh grass and trees as a result of exposure to the oil. A research observed that oil under the surface of water seemed not to be degrading. The oil fell to the floor of the ocean and this could result to have long term effects, where oil may persist in food chains for many generations.

Economic effects of the oil spills

The oil spill impacted BP’s economy in a great way. Various economic sectors were affected. These sectors include fishing sector, tourism sector, drilling sector etc. great costs were incurred by BP, which included costs that were associated with settlement of the responses from the spill, claims paid, containment costs, and grants to the states within the Gulf, and penalties and fines. The total costs that BP may incur may average to $90 billion as a result of the spill. In the year 2013 BP had become the fourth largest oil company after dropping from the second position. The recoiling of the company had impacted BP’s gas stations in the US where they had recorded a decrease of around 30% in their sales. The spill would affect the coastal communities’ economies in a negative way because the oil industry is a key employer in Louisiana (Liu 23). The closure of about 36% of Gulf of Mexico’s federal waters by the NOAA generated a cost of $2.5 billion to the fishing industry. The tourism sector would lose about $23 billion over a period of three years as estimated by Travel Association of the US.

 

Recovery process

During the months that followed the explosion and the oil spill, there were many predictions that the Gulf would be a dangerous place to operate for companies in exploration businesses. These tough conditions would eventually force drillers to exit the region and hence shrinking the industry. However, five years after the spill, exploration companies and key drilling companies are unaltered. Even with new regulations and high costs of drilling in federal waters the companies are still doing well. BP is among those drilling companies that are still commencing on their activities in the region despite what the company faced. Even though these companies are still exploring the region, sources have it that there the number of new investors has reduced. According to Fitz, companies that were still drilling in the Gulf before the occurrence of the spills remained but new investors have a fear of post spill risks and hence not willing to invest there. This fear has been perceived as a good safety measure, since the companies that had already invested in the region possess the resources and capital to acquire better training and equipment.

Recovery in production

The Mexican Gulf was expected to reach the levels of production of oil and gas that it enjoyed before the spill by the end of the year 2014. The US Energy Information Administration projected that the daily output would surge up to 1.52 million barrels by the end of the same year, but would later slow after 2016. In the last year, drilling processes remained stable, with more than 89% of the of the fifty five drilling rigs in the Gulf being under the contract during the first quarter of the year. Major companies, including BP were leading the growth. A major company; Chevron was expected to have a year full of production in 2014 at its oilfields of St. Malo and Jack (Keeley, Brian & Patrick 117). These oilfields have been targeted to produce a total of more than five hundred million barrels of oil in the next thirty years. Some companies, including SandRidge Energy, Apache, and Samson were some of the independent companies that sold their assets in the Mexico Gulf in 2014. However, other companies e.g. Anadarko continue to invest in the region. Anadarko was a partner with BP in the Macondo well and the company, just like BP is still marching on in the Gulf.

Spreading of risk

There has been a competitive shift in the Gulf of Mexico according to the recent sales of lease by the federal government. In the year 2010 lease sale almost a third of tracts companies placed bids on received multiple bids. Prized leases six offers. In the year 2014 there was only a thirteen percent multiple bids on bid on tracts. According to a senior analyst, the reason for the low bids could be associated with the low prices of oil (Rochester 126). In March 2014, the price of a barrel of oil was $47.82 compared to $100 in that was the price in the previous summer. Companies in the Gulf have been forming partnerships in different projects to spread out the costs and risks. Partnership is more so emphasized when companies are drilling or investing in new and/or deeper waters. A good example of partnership was the between BP, Conoco Phillips and Chevron. BP partnered with these companies after reducing its ownership of offshore leases.

 

 

The current state of BP Oil Company

Currently the BP Company is whole again and is teeming with nature. The company has overcome the deepwater horizon spill’s aftermath and is doing well in exploration industry. In March 2015, BP made a report, announcing that the Gulf had recovered to a great extent. There water and sediment samples that exceeded the toxicity levels according to the federal were reported to be just less than two percent. This report brought hope to many people who had feared the catastrophe. The Gulf was considered to be recovering at a faster pace than was expected. This recovery can be attributed to the efforts of BP Company, the natural processes, and the Gulf resilience. BP has improved on its operations as it has been working under close supervision of the federal. This has enabled BP to grow and it has recently been reinstated to a better company than it was before the occurrence of the occurrence of the spill. BP has developed and extended its operations in most part of the world where its success has continued to prevail in all these places. BP has been classified as a great and strong exploration company, together with the independent companies that endured the oil spill by remaining in the gulf region (Falola, Toyin & Genova 48).

A stance on the research

The US and the oil industry will have to absorb the lessons from the spills caused by the BP Company in the Mexican Gulf. On the other hand, regulators will have to toughen their inspections so as to protect the occurrence of another oil spill. There is a need for oil companies to adopt better and strict safeguards. The companies should develop and adopt new technologies for effective cleanup in the event of oil spills. The coastal communities should consider developing emergency plans associated with oil spills for preparedness to deal with oils spills in the event of their occurrence. Oil plays a big role in the global economy. Industries should therefore take the example of BP Company. They should not turn away from problems but rather counter them. Drilling companies should explore for new sites of crude oil to add on the declining oil fields that are already producing oil (Liu 55).

The BP oil spill provides a great lesson on economic and environmental risks. These risks may be attached to the over reliance on fossil fuels. Taxes and rules should be developed concerning the burning of oil so as to conserve the environment. The challenge that faces US’s energy sector is the technological and the political vaults. Through technology, there should be the development or electric cars that will take the place of internal combustion engines. At the moment, there attempts should be made to develop preventers of browouts in drilling companies and develop drilling techniques. The adoption of better drill rig will improve on the drilling processes as well as preventing future oil spills and explosions. This has been supported by the attempts that are ongoing to develop the ‘sixth-generation’ deep sea rigs that will be the safest that will have ever been developed.

Works cited

Bader, Christine. The Evolution of a Corporate Idealist: When Girl Meets Oil. , 2014. Print.

DesJardins, Joseph R. Environmental Ethics. Belmont, Calif: Wadsworth, 2012. Print.

Falola, Toyin, and Ann Genova. The Politics of the Global Oil Industry: An Introduction. Westport, Conn: Praeger, 2005. Print.

Freudenburg, William R, and Robert Gramling. Blowout in the Gulf: The Bp Oil Spill Disaster and the Future of Energy in America. Cambridge, Mass: MIT Press, 2011. Print.

Keeley, Brian, and Patrick Love. From Crisis to Recovery: The Causes, Course and Consequences of the Great Recession. Paris: OECD, 2010. Print.

Landau, Elaine. Oil Spill!: Disaster in the Gulf of Mexico. Minneapolis, MN: Millbrook Press, 2011. Print.

Liu, Amy. Resilience and Opportunity: Lessons from the U.s. Gulf Coast After Katrina and Rita. Washington: Brookings Institution Press, 2011. Print.

Rochester, J M. Between Peril and Promise: The Politics of International Law. Thousand Oaks, Calif: CQ Press, 2012. Print.