The past period has seen the growth in the oil and gas industries which have propelled the momentum of the energy sector and modified the view of the local populations towards the activities of the companies. The business ethics defining the corporate and firm’s structure of the government in charge lack credibility and responsibility towards the citizens. Unethical practices such as careless management decision making and the oil firm’s attitude towards their environment have put the life of the surrounding ecosystem in to a risk. People who were initially dependant on small scale fishing and farming in the neighbourhood for their livelihood finding themselves in a tight situation due to the polluted environments. With the widening of the energy business the oil and gas industry currently continuous to encounter challenges. Secure extraction of these resource is becoming a factor with several employees finding themselves exposed to risks of injury or even health issues. With the resource and wealth generated from the industry the society expect giving back in terms of support to solve societal issues of which the sector has failed. In addition, the extraction of oil has resulted in oil spills polluting the regions and causing massive disappearance of life. Gradually the countries are developing policies to protect themselves from these disasters but the ethical issues are yet to be taken seriously if recent repetitive occurrences in the sector are anything to
The relationship between management of ethical risk in the oil and gas industry and reduction in the accidents.
Due to the several risks surrounding the oil and gas industry the industry stake holders drafted several ethical issues to assist curtail the disasters and the magnitude of the aftermath of the disasters should an industry experience one. Form the case study we see several cases under which failure to manage ethical issues have directly impacted on severe accidents.
In the wreck of the Exxon Valdez the first situation occurs when Gregory Cousins take the captaincy of a very large crucial ship ferrying very risky product in a sea which he is not licenced to operate in it becomes even worse to note that the pilot of this ship was spending time sleeping thereby neglecting his duties I purpose. On the other hand, after the wreck the pilot tries to free the ship from the reef by rocking the tanker. Even though the sea guard expertly advised against this he goes ahead hence causing a severe spillage of oil into the sea
When the officials of the Exxon acknowledged putting the ship on the hands of a drunkard undergoing treatment then the ethical connection to the accident just becomes too visible.
The Deep-water Horizon oil spillage further supports this notion that poor management of ethical issues is the back bone of majority of the accidents (Huntington, 2009). Prior to the accident, we researchers point out to numerous ethical issues which it was to be addressed in advance would have obviously impacted in reducing the possibility of the disasters. BP firm preferred less costly oil well design which increased the risk of the accident, also the experts observed that the firm management neglected vital procedures which were meant to test the presence of gases in the pipes a condition which seemingly led to the explosion (Minerals Management Service, 2011). This ethical negligence further becomes painful to the victims of the disaster when observers indicate that the experts gave a go-ahead to the process after observing warning signs during their safety test on the oil rig.
It evident form this case study that there is a perfect positive correlation between the number accidents occurring and the poor management of ethical risks in the oil and gas sector. Despite the managers being aware of the riskiness of their environment of operation and the huge health and environmental consequences brought about by accidents in the area. It quit unimaginable how they can afford to take such a risk only considering their potential profits
Comparison of the risks faced by BP, Exxon and the Fracking industry in their bid to adequately supply energy
The oil and gas segment is characterised by tapping invisible, under pressure underground petroleum resources and try to abstract those resources securely from the ground. After the extraction, the products are mainly ferried for a long distance through the pipeline or ocean destined tankers (Nossiter, 2010). In addition, the refinement of the product is carried out via a combination of technical chemical combinations comprised with higher pressures and high temperatures. Every single stage involves in the petroleum and gas mining, processing and transportation are under the operations of people which historically have proven to be susceptible errors. The BP, Exxon and Fracking industry are all involve in the oil and gas sector and for that purpose they tend to face similar risks when it comes to their quest to supply energy adequately to the population. These risks are generalised into environmental, health, safety, and liability and reputational.
The environment risk has been one of the major issue when it comes to petroleum and gas products. Just like other forms of extracting the natural resources oil and gas mining is not carried out in a vacuum rather they are undertaken in areas which have various forms of life developing. From the sea life in the oceans where oil and gas mining often takes place to the land animals. As indicated by the case study the various human error which often lead to accidents have been evidenced to portray a heavy consequence to life.
When the Exxon Valdez wrecked in the year 1989, the oil spillage spreads rapidly in few days killing thousands of sea birds, sea otters and the entire wildlife which was in the shoreline environment. The prince Willian Sound area where the accident occurred at that time was home to several species of birds. These environmental effects flowed to the people who were dependant on that part of the sea for fishing, an industry that was estimated to generate of $100 million annually. Even up to now as the ExxonMobil insists on the recovery of the area researchers are still indicating that toxins are still leaking from the Exxon Valdez oil which remains on the beaches and hence continuing to harm the wildlife.
This risk is once again portrayed in the Deep-water Horizontal oil spill which saw an oil rig explode and release million gallons of oil into the Mexican gulf killing thousands of marine animals with scientists indicating that there is still oil lurk in the seafloor and hence offering a threat to coral reefs and other marine life.
Similarly Fracking even though deemed safer compared to petroleum and gas in terms of environmental risks the case study indicates that these statistics seems to be misleading. These challenges are similar only that when it comes to fracking the environmental impacts tend to affect individuals hence a bit suppressed. An example is the release of radioactive gases and reduce the value of homes in the areas which Fracking is taking place are some of the issues affecting their environments not forgetting to add seismic waves to the group.
Another risky area that have impacted on the sustainability of firms operating on the oil and gas sector is the health issue. First, the mining and consumption of the petroleum products and natural gases have been with associated with release of toxins into the atmosphere and the surroundings in general. This have led to emergence of a series of health issues. In the Fracking segment, we see randy Mayer an employee at one of the firms undertaking mining going through a series of health issues from the toxics he interacted with when on duty. Also, a couple is complaining of the death of their animals after allowing fracking to take place in their land an indication that there is toxics coming out of the process which are harmful to health. The massive death of wildlife from the sea plants and animals caused by the BP and Exxon Valdez oil spillage is just an example of how harmful the oil and gas is when it comes to health. This makes a major risk to the existence of the oil and gas industries.
As much as safety is related to health when it comes to riskiness it is observed to be an independent issue. The Deep-water horizon spill is a very clear illustration of what safety is all about. Both the BP, Exxon and Fracking are activities which are carried out in very vulnerable conditions. The case study gives perfect evidence of the riskiness when it comes to safety from animals to the employees directly involved in this segment. A refinery under the BP care exploded in Texas and killed 15 employees, again in April 2010 an oil rig in the Gulf of Mexico exploded and killed a total of 11 employees. In the Fracking segment, we see the author showing concern over the magnitude of people who will be affected by catastrophizes in the sector due to the proximity to human settlement of the of the operations of fracking.
Liability even though a risk that have little effect to life hence not loudly mentioned is a very heavy risk to the firms. In the Exxon Valdez wreck the case study clearly indicate the heavy penalties the firms suffered in liability for failing to prevent the accidents. First in the oil spillage BP firm and the Exxon spent billions of shillings clearing the oil spill. They are further forced to compensate the other users of the sea for the loss of income arising from the pollution of the sea. Though Fracking sector is yet to be affected by a large-scale accident its proximity to the general population is just an indication of the level of liability the firm’s will carry shall they see a disaster in their operations.
Further we look at the reputational risk which is associated with any form of accident in the firms.
When the Exxon Valdez wrecked, we see the public outcry forcing the firm to complete the clearing of the oil spillage that tells you what the public perception is regarding the responsibility of the firm to the accident. The same fate is also suffered by BP when accidents occurred at their firm. We see the frim even undergoing the extent of changing their name to try win back the public trust after the accidents. The fact that several countries from France to Germany as well as Bulgaria have banned the fracking activities tells it all on how the reputational risk is a challenge to the firms in the oil and gas sector.
How ethical leadership helps the oil and gas industry manage risks
The area of operations of the oil and gas extraction services is surrounded by risks which are impossible to mitigate without a unique procedure of business operations. On our case study, we visualise several risks which were simply occurred because of negligence to adhere to the ethical leadership standards (Faure, 2005). During the aftermath of the Exxon disaster experts pointed out several issues which indicates lack of ethical leadership thereby contributing to the risks. Should captain Joseph Hazelwood taken his leadership responsibility of steering the ship safely the accident had a chance of having been avoided. But even after the wreck he still goes ahead to depict unethical leadership when he tries to wreck the ship free even after being made aware his behaviour was increasing the magnitude of oil spillage. This situation and increased risk of liability, health and environmental could have been prevented if ethical leadership qualities were exhibited. The situation is even made controllable should the Exxon officials adhered to the ethical requirements and disallowed operation of such an important ship by a drunk captain (amseur, 2013).
Immediately after the disaster we observe a massive unpreparedness from the disaster management company which further propelled the magnitude of risk encountered. From disarray of oil containment equipment to wastage of very vital time from their unstable and in appropriate decision making (Roach, 2010). When we are told about the nature of skimmer boats which were being used to clear the disaster our conclusion that unethical leadership is what propelled the liability risk higher is undisputable. Considering the firm’s decision to save 22million instead of building a second hull and the failure of the CEO to visit the scene or comment on the disaster for up to 6 days after the disaster we observe a level of carelessness in the management which directly increased the risks of the firm.
The careless and unethical leadership style is again portrayed by the BP organisation, instead of focusing on effective risk prevention techniques after the Exxon accident the managers engage in array of risky unethical leadership decisions which eventually led to severe loss to the firm (Environ International Corporation, 2007). The managers by choosing cheap means of extraction by shortening the equipment testing procedures and constructing a cheaper but risky oil rig designs only tarmacs the road to disasters.
The situation in the Fracking sector is not different either experts have clearly outlines procedures which if followed will eventually reduce the risks associated with the process to acceptable levels. It’s therefore up to the people in charge of the operations to adhere to this ethical standard to minimise the risks threatening the sustainability of the sector.
Management of this cases illustrated is a sure way of reducing the risks and so ethical leadership is just the obvious way forward (Pechan, 2006).
The oil and gas industry is one very profitable sector. Due the environment of its operations the sector s one very risky venture. Despite the risks, it has attracted several firms such as Exxon and BP organisation (Argonne National Laboratory, 2004). The sector has asset of code of ethics that define the way its run but greed for money have seen firm such as BP preferring to build their public image through lies but without putting in place adequate techniques to combat risk of distress in the firm. The explosion of the oil rig combined with number of expert opinions is a strong evidence to this failure to portray ethical leadership. On the hand the management of Exxon ship wreck is another depicter of the consequences of failure to adhere to the ethical issues in the sector.
Even though the Fracking sector is just arising there are already pointed issues such as the release of casino genic toxins to release of dangerous gases into the atmosphere which need immediate attention to ensure its sustainability. In conclusion, the case study is a pure evident of how adhering to the ethical codes will massively improve the nature and extent of disasters to the sector (American Petroleum Institute, 2000).
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