What was the root cause – really, the root, root cause of the Deepwater Horizon oil disaster?
Let us answer that with another question.
Who owned the Deepwater Horizon drilling platform?
Our (quite non-scientific) survey shows that at least 7 of 10 Americans were – at a minimum – confused enough to give no answer or the wrong answer. Worse than that, the companies involved – TransOcean, BP, and Haliburton, all seemed to quickly void themselves of ownership and responsibility once the disaster occurred.
So we assert that one of the biggest risks of all – perhaps one could call it the “parent” risk – was that the well, without clear ownership, didn’t have clear direction, clear objectives, clear identification of stakeholders, mission, everything that one needs to run a project.
Good project managers know that a project is laden with risk. They also know that a good risk register has a list of well-formed Risk Statements, and that Risk Statements always have a component tied to project objectives. Again, without clear objectives, risk cannot even be identified properly, and without identifying risk, you cannot analyze or treat it.
That’s the PM way of looking at it. For another view, we provide for you a clipping from a recent editorial by William Shughart II, a senior fellow at The Independent Institute in Oakland, Calif.
“The tragic April 20 explosion that destroyed BP’s Deepwater Horizon oil platform in the Gulf of Mexico, killing 11 crew members, didn’t happen in a vacuum.
BP clearly is culpable. And the Interior Department’s Minerals Management Service, now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, shares in the blame, for failing to exercise proper oversight.
Many other factors also contributed to the accident, however.
First among them is the important issue of ownership. BP did not own the Deepwater Horizon, but leased it from another company, Transocean. The contractual relationship between Transocean and BP created a classic “principal-agent” problem in which the duties and responsibilities of the lessor, or owner, and lessee, the renter, may not have been spelled out adequately. This is especially true with respect to the rig’s maintenance, testing of its blowout preventer, or the need for an additional backup device, known as a “blind sheer ram,” which may have been able to plug the well after the blowout preventer failed.
Ownership does matter. BP may have been more safety-conscious if it held title to the Deepwater Horizon. Transocean and BP now are at loggerheads. Many lawyers will get rich in the process of determining the extent to which BP and Transocean were negligent.
A second contributor to the disaster is the federal law limiting liability for damages caused by offshore oil spills. Although the $75 million limit can be waived in cases of proven gross negligence (and likely will be in this case), BP probably would have been far more cautious from the beginning if it knew that a major blowout could cost the company billions rather than millions. Even in 2009, with energy prices sharply down from the recession, BP reported a $14 billion profit. The slim prospect of a $75 million liability “hit” may not have even raised an eyebrow.
Third, BP may have been misled in calculating its exposure to risk by MMS computer models that predict the likely path of large-scale oil spills in the Gulf of Mexico. These models, according to news reports, have not been updated since 2004 and have never included scenarios in which blowouts happen in ultra-deep waters, which the Minerals Management Service and oil industry have always considered low-probability events. After all, the last accident of any consequence at an offshore oil well in U.S. waters was more than 40 years ago, in 1969, off the coast of Santa Barbara, Calif.”
The editorial goes on to criticize the White House, regulations and other agencies. Here is a link to the full editorial.
We admire Shughart’s identification of ownership as a primary and root cause of the problem.
Watch for this in your projects. And remember the connection between objectives and risk – as Joni Mitchell once sang, “you don’t know what you’ve got ’til it’s gone” . We think Joni was singing about connecting risk to project objectives, but perhaps that’s just us…
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« Follow-up to “A balanced view”
HAPPY PLANET….? »
What was the root cause – really, the root, root cause of the Deepwater Horizon oil disaster?
Let us answer that with another question.
Who owned the Deepwater Horizon drilling platform?
Our (quite non-scientific) survey shows that at least 7 of 10 Americans were – at a minimum – confused enough to give no answer or the wrong answer. Worse than that, the companies involved – TransOcean, BP, and Haliburton, all seemed to quickly void themselves of ownership and responsibility once the disaster occurred.
So we assert that one of the biggest risks of all – perhaps one could call it the “parent” risk – was that the well, without clear ownership, didn’t have clear direction, clear objectives, clear identification of stakeholders, mission, everything that one needs to run a project.
Good project managers know that a project is laden with risk. They also know that a good risk register has a list of well-formed Risk Statements, and that Risk Statements always have a component tied to project objectives. Again, without clear objectives, risk cannot even be identified properly, and without identifying risk, you cannot analyze or treat it.
That’s the PM way of looking at it. For another view, we provide for you a clipping from a recent editorial by William Shughart II, a senior fellow at The Independent Institute in Oakland, Calif.
“The tragic April 20 explosion that destroyed BP’s Deepwater Horizon oil platform in the Gulf of Mexico, killing 11 crew members, didn’t happen in a vacuum.
BP clearly is culpable. And the Interior Department’s Minerals Management Service, now known as the Bureau of Ocean Energy Management, Regulation and Enforcement, shares in the blame, for failing to exercise proper oversight.
Many other factors also contributed to the accident, however.
First among them is the important issue of ownership. BP did not own the Deepwater Horizon, but leased it from another company, Transocean. The contractual relationship between Transocean and BP created a classic “principal-agent” problem in which the duties and responsibilities of the lessor, or owner, and lessee, the renter, may not have been spelled out adequately. This is especially true with respect to the rig’s maintenance, testing of its blowout preventer, or the need for an additional backup device, known as a “blind sheer ram,” which may have been able to plug the well after the blowout preventer failed.
Ownership does matter. BP may have been more safety-conscious if it held title to the Deepwater Horizon. Transocean and BP now are at loggerheads. Many lawyers will get rich in the process of determining the extent to which BP and Transocean were negligent.
A second contributor to the disaster is the federal law limiting liability for damages caused by offshore oil spills. Although the $75 million limit can be waived in cases of proven gross negligence (and likely will be in this case), BP probably would have been far more cautious from the beginning if it knew that a major blowout could cost the company billions rather than millions. Even in 2009, with energy prices sharply down from the recession, BP reported a $14 billion profit. The slim prospect of a $75 million liability “hit” may not have even raised an eyebrow.
Third, BP may have been misled in calculating its exposure to risk by MMS computer models that predict the likely path of large-scale oil spills in the Gulf of Mexico. These models, according to news reports, have not been updated since 2004 and have never included scenarios in which blowouts happen in ultra-deep waters, which the Minerals Management Service and oil industry have always considered low-probability events. After all, the last accident of any consequence at an offshore oil well in U.S. waters was more than 40 years ago, in 1969, off the coast of Santa Barbara, Calif.”
The editorial goes on to criticize the White House, regulations and other agencies. Here is a link to the full editorial.
We admire Shughart’s identification of ownership as a primary and root cause of the problem.
Watch for this in your projects. And remember the connection between objectives and risk – as Joni Mitchell once sang, “you don’t know what you’ve got ’til it’s gone” . We think Joni was singing about connecting risk to project objectives, but perhaps that’s just us…
« Follow-up to “A balanced view” HAPPY PLANET….? »