Essay: Ethical Risk In Oil & Gas Industry And Accident Reduction.

The world's dependence on oil and gas

Despite the many controversies surrounding the economic and environmental effects of drilling for oil and gas, there is no denying the world's dependence on these commodi• ties. It is estimated that total global demand for natural gas will reach over 4 trillion cubic meters by 2017. Global crude oil demand is already at 90 million barrels per day. While petroleum products are most often associated with machines or factories, they are also used to produce commercial products including plastic, pesticides, fertilizers, and even certain pharmaceuticals.

Unfortunately, the world's dependence on oil and gas has created significant chal-lenges. The demand for oil depletes the world's oil reserves at an alarming rate; while there appears to be little agreement on when the world's oil reserves will be completely depleted, fears that demand is quickly outstripping supply have increased the drive toward investi-gating alternative energy sources. Additionally, the oil and gas industry has many risks. Safety is a large concern, and major accidents have caused the gas and oil industry to be heavily criticized.

However, one of the greatest concerns of the oil and gas industry is the environmental risks associated with it. Drilling operations are accused of contributing to water pollution and the release of air contaminants into the atmosphere. These greenhouse gases in turn contribute to the warming of the Earth's atmosphere, leading to greater risks of polar ice cap melting, flooding, and other environmental damages. Yet what attracts the most atten-tion are when oil and gas companies experience major disasters leading to massive envi-ronmental damage—namely, oil spills. Because many of the world's oil reserves are located beneath the ocean—requiring petroleum companies to use drilling rigs to extract the oil from beneath the surface of the ocean floor—any leak has the potential to create serious harm in a quick amount of time. Petroleum companies must guard against these industry-specific risks. 

The first Alyeska containment equipment did not arrive at the scene until hours after the disaster; the rest of the equipment came the next morning. Neither Alyeska nor Exxon had enough containment booms and chemical dispersants to fight the spill. They were not ready to test the effectiveness of the dispersants until 18 hours after the spill, and they con-ducted the test by tossing buckets of chemicals out the door of a helicopter. The helicopter's rotor dispersed the chemicals, and they missed their target. Moreover, the skimmer boats used to scoop oil out of the sea kept breaking down. The skimmers filled up rapidly and had to be emptied into nearby barges, taking them out of action for long periods of time.

Environmental and safety concerns

Cleanup efforts were further hampered by communication breakdowns between coordi-nators on shore and crews at the scene because of technical problems and limited range. In addition, although a fleet of private fishing boats stood by ready to assist with the con-tainment and cleanup, Exxon and Alyeska failed to mobilize them. Because of inclement weather and other problems, by the end of the week the oil slick had spread to cover 2,600 miles of coastline and sea. Some of the problems could have resulted from cutting safety corners. For instance, Alyeska convinced the Coast Guard that certain additional safety features were not needed on tankers. Its contingency plan underestimated the time needed for containing the spill, and it also lacked equipment needed to contain the spill. Overall, Alyeska gave the impres-sion that it was unprepared for a major disaster.

Exxon received blame as well. For instance, it saved 522 million by not building the Exxon Valdez with a second hull. At the time of the spill, Chairman Lawrence Rawl did not comment on the spill for nearly six days, and then he did so from New York. Although Rawl personally apologized for the spill, crisis-management experts say it is important for the chief executive to be present at the site of an emergency. Perhaps most damaging was Exxon's insistence that it would stop all cleanup operations on September 15, 1989, regardless of how much shoreline remained to be cleaned.

In a memorandum released in July 1989, the September deadline was said to be "not negotiable' After much public and government protest, however, the company's president promised Exxon would return in the spring of 1990 if the Coast Guard determined further cleanup was warranted. Exxon returned that spring and for the next four years for further cleanup efforts. 

Developing an ethical organizational culture requires an examination of the risks to vari-ous stakeholders. In the case of the oil and gas industry, several companies failed to put in the safeguards necessary to protect employees, local communities, suppliers, and the viability of many industries. After the Exxon Valdez disaster, there should have been a heightened awareness of the risks of offshore drilling and a mandate to implement every safeguard necessary to protect the environment. Yet BP appeared to assume that such a disaster would not happen to them, despite previous safety issues at the firm. Much like in the Exxon Valdez disaster, BP failed to implement certain safeguards that might have pre-vented or lessened the scope of the disaster.

This corporate culture of risk taking must stop in order for the oil and gas industry to restore its reputation. This requires ethical leadership and effective ethics and compliance programs that reach all employees. Employees need to be educated that they are responsi-ble for displaying leadership to avoid misconduct that could create accidents. Although the nature of the industry makes certain risks inevitable, firms can develop improved safety measures and contingency plans to contain the disaster should things go wrong. Many actions occur when risks are present and there is a failure to observe existing ethical codes and policies. Companies involved in the lucrative field of hydraulic fracking can use the lessons from its predecessors to develop a culture that makes safety and environmental consideration top priorities during the drilling process.

The industry has a new respon-sibility to provide leadership in safety and sustainability. The reputation of the oil and gas industry is dependent on its ability to commit to a socially responsible approach and stake-holder engagement. 

1.How Does managing the ethical risk in the oil and gas industry relate to reducing accidents

2. Compare the risks that BP, Exxon, and the fracking industry continue to face in provid-ing an adequate supply of energy

3. How can ethical leadership help the oil and gas industry to manage risk.

The world's dependence on oil and gas

Conventionally, a higher population within the world relies on the production of oil and gas simply for production of energy at either homes or work place for those dealing with machines or factories thus increasing the demand (Francis, 2014, n.p). However, the high dependency on oil and gas has created challenges and lead to depleting of the world’s oil reserves. The fear of the rapid increase in oil demand has lead to investigation of alternative ways of producing energy. Since production of gas and oil requires drilling processes, this has raised a concern on the risks that affect the environment. The oil industries are blamed for pollution of water due to oil spillage on the oceans as detailed by Josh (2014), as the effects of oil spillage. Gas industries are as well accused of air pollution as they release air contaminants. All these risks caused by oil and gas industries leads to environmental damage yet the attention is attracted when these industries experience disasters leading to environmental damage. Since most industries do not entertain the game of risk taking, most of them tend to implement safety measures that prevent environmental damage and disasters from occurring (Francis, 2014). A high number of oil and gas industries tend to apply the ethical leadership in order to manage the risks that the industries face.

An oil and gas industry faces disasters and loses due to available risks that are not well managed. This case study report aims to discuss why most industries incur the cost of cleanup and restoration of the oil spill on oceans. Moreover, the paper rationale will chronicle around the oil spillage that attracted the global attention, the Exxon Valdez spill, which culminated to the increased impact on its environmental effects (Francis 2014)). Despite the lessons learnt and extracted from the Exxon Valdez spill, oil and gas industries continue facing risks that engage disasters to the environment and air. The following discussion involves the risks that BP, Exxon and Fracking companies face in production of oil and gases.

How best do we treat risks to reduce accidents? What control measures should the oil and gas industries take to reduce the rate of accidents occurring within the industries? These are the questions that the management of industries asks when disasters occur. The oil and gas industries implemented the ways of managing risks that help reduce the rate of accidents. Managing ethical risk is achieved by ensuring that the employees are able to notice the problems occurring around the industries. Those employees who are morally upright and are responsible in managing their duties by applying the lessons acquired in ethics studies, are able to manage risks hence reducing the chances of accidents from occurring (Josh, 204, p. 34).

Environmental and safety concerns

Apparently, Human resource management on the other hand, involves the process of planning, staffing, controlling, supervising, and empowering human labor in an organization. The primary reason for human resource management to empower and maximize the human labor performance within an organizational ethical conduct revolves outside the organization in service of the strategic objectives of the employer. Usually, organizational ethics and conduct is governed by the strategic policies and it is designed to fore tell the employees benefits, recruitment, training, performance appraisal, development, and rewarding such as management of benefit system and salary (Francis 2014). It also aids in organizational innovation processes, which might be, changing the recruitment strategies, reducing resource allocation within a certain department or reducing or increasing the number of workers in a certain department depending on its productivity or labor force required.

Based on the scientific research, human resource management can also be defined as a business arena, which is focused in promoting the employees productivity. Managing risks means preventing risks from occurring within the industry and therefore if risks are managed, the rate of accidents tends to reduce (Mouawad 2010). Hence, management of ethical risks relate to reduction of accidents in that when the employees are responsible and are able to identify the risks on time and report them, then incidents of accidents will reduce. Reduction of accidents will help the industry reduce the cost of cleanup of the oceans and the environment.

According to the case study rationale, accidents occur in the mining sites, as well as during the transportation channel of the supply chain portfolio, which have grown to be a threatening issue to the organizational ethics, risks, and managerial framework due to its complexity. In fact, the management of organizational risks revolves around the magnitude of accountability, responsibility, and job structure in the organizational divisional roles framework (Carroll & Buchholtz, 2014). For instance, when every staff, junior managers, and the supervisors adhere to the ethical and moral contextual framework, employees experience the best working conditions, fair and just remunerations, as well as deriving the feeling of the firms’ responsibility in creating the positive public image. Ultimately, due to the complexity nature of the oil and gas industries, to minimize risks, the firms ought to create an organizational inbuilt insurance policy that directly correlates to the managerial roles hierarchy accountability.

Despite the control measures applied in oil and gas companies, risks are always the fear of these companies. There are various risks that these companies face despite all the control measures implemented and have made the oil and gas companies to be criticized due to the many accidents the companies have caused (Josh 2014). While providing adequate supply of energy, the BP, Exxon and Fracking industries continue to face the risks that lead to accidents most of the time. These risks are faced due to the poor communication within the industries. The one area that requires advanced communication is between the management and the employees who interact with the processes of oil and gas production.

Lessons from the Exxon Valdez spill

The major risk that BP, Exxon and Fracking oil companies face is the risk of oil spillage (Mouawad 2010). Most companies produce oil and gas with the fear that the oil or gas might spill at any time causing harm. Oil can spill from the tanks filled with oil especially when being transported through the seas. The Exxon Company experience oil spilling risk in 1989 when the oil being transported started to lick from the tanks due to the unusual right turns made in order to dodge floating ice. In BP, the company changed its name to BP (Beyond Petroleum) after the explosion that killed 15 employees in order to convince the stakeholders that the company is committed to make safety and sustainability in the environment. The case of oil spillage in Exxon Company repeats itself in BP Company when the Deepwater Horizon oil rig exploded in Mexico under the supervision of Exxon Oil Company.

In general, the oil spillage risk leads to the environmental risk that Oil Companies face. The grilling processes are said to contribute to pollution of water and air through the release of air contaminants. The companies not only get gas and oils from beneath the oceans but also from dry grounds. A mistake of oil spillage from the pipes transporting oil or gas will lead to destruction of the environment (Mouawad 2010). BP made a mistake of using a less costly design that is described and deemed ‘risky’. BP Company also used a faulty blowout preventer that had stuck blades which gave space for oil to leak out.

Notably, the risks and challenges facing the oil and gas industry chronicles around poor supply chain portfolio design and lack of accountability and responsibility in the sector. Ultimately, comparing the risks and challenges of BP, to that of Exxon and the Fracking Industry, BP faces organizational strategy structure system challenge that ought to assess and combat the risks and challenges involved in the transportation of the oil and gas products. This has led to the occasional sales lag, which dictates the organizational risks and challenges framework in terms of monetary loses incase of accidents (Francis, 2014). On the other hand, at large, Exxon and Fracking industry lacks the moral and ethical workplace accountability, which manipulates the degree and magnitude of each employee’s roles in managing and curbing theft/corruption in the oil and gas sector. For example, the Exxon Valdez Oil spillage massacre may have been primarily caused by poor delegation of supply chain portfolio system, where accountability and responsibility of the oil spillage may have culminated from irresponsibility of ethical conduct at workplace.

Risks faced by BP, Exxon, and the fracking industry

Most industries are thriving to come up with systems that are founded on trust since ethics refers to the state of knowing what is right and wrong with the capability of handling your responsibilities as required of you. To come up with trusted systems, employees need to have positive and reliable behaviors that will help them manage their responsibilities as required by the industry. Ethical leadership should be implemented in oil and gas industries for the easy management of risks (Josh, 2014, p. 74).

Ethical leadership helps risk management by helping the management of an industry to protect the reputation of the company and increase the engagement of employees in work by ensuring that they work where ethical conduct is the norm. Human resource management (HRM), also called personnel management, consists of all the activities undertaken by an enterprise to ensure the effective utilization of employees toward the attainment of individual, group, and organizational goals (Josh, 2014). An organization's HRM function focuses on the people side of management. It consists of practices that help the organization to deal effectively with its people during the various phases of the employment cycle, including pre-hire, staffing, and post-hire. The pre-hire phase involves planning practices. The organization must decide what types of job openings will exist in the upcoming period and determine the necessary qualifications for performing these jobs. During the hire phase, the organization selects its employees. Selection practices include recruiting applicants, assessing their qualifications, and ultimately selecting those who are deemed to be the most qualified. Ultimately, Ethical leadership helps management to manage risk and promote sustainability hence maintaining stakeholder’s value different steps (Carroll & Buchholtz 2014). These steps that aid in reducing and managing risk include:

A good business will always kick off with a plan on how to manage and use the resources available in the industry. So as to attain successful ethics programs in planning, the industry has to know what common ethics challenges are within the industry, what are the greatest areas of risk eg, which group is at risk, what ethics resources will be of help to the group at risk and who will be helpful after all the ethical leadership application.

At this point the industry is able to come with ethical programs after identifying the needs of the industry needed in managing the risks. When the industry places its resources to ethics, it then gets a chance to make a difference in that it increases the employee’s reporting of any observation on risks that occur within the industry (Freudenburg & Gramling, 2011). Management comprises of organizing a series of actions, mobilization of resources and control of human labor within governmental or nongovernmental organizations with an aim of achieving their objective in the cheapest and effective way possible. The actions involved in this case are as follow:  planning, controlling, coordinating, staffing and development, communication, supervising, and decision making processes. Management ensures that all the actions mentioned above are observed to the fullest. There are several types of managements required in any organization which are basically classified into two. Non human management is the first type of management. Ethical leadership in an industry helps reduce pressure to compromise standards and this makes the employees more active in reporting any risk to the management before the problem gets out of control.

Most employees would retain their desires to do the right thing in oil and gas industry but are influenced negatively by the company the keep. A company with a strong ethics program helps to build a strong ethics culture where employees are committed to doing right no matter the level of work. In this, the chances of experiencing risks in the industry are low since all the employees are reporting the small problems as ethical leadership skills have taught all of them (Francis, 2014). It then becomes easier for the management to manage the risks as they occur before they mature to the worst level of causing severe damages. In respect to the case study rationale, the establishmen of cultural norms at workplace, and catering for societal way  of operations dictates the establishment of an ethical organizational struture. The organizational framework must be able to accumulate the different employees' backgrounds, strengths as well as strategizing on acceptance and recognition of distinct employees' voice opions (Josh, 2014. Through the establishment of  strong ethical cultural performance norms such as setting evaluational grounds for employee performance appraissals, proper channels of promotional basics, as well as defining the delegation responsibilities in the organizational authoritative hierachy.       

As the industry proceeds with the production of oil and gas, more needs tend to arise apart from the existing needs. The industry needs to take into consideration the needs that require its attention and know what is working and what is not. The company needs to employ the emerging vulnerable and keep revisiting the state of ethics related with the risk assessment so as to minimize the chances of risk.

Therefore, involvement of the employees in ethics programs with ethical leaders will enable the employees to be more responsible and observant in their workplace. The employees will be in a position to identify problems and detail them to the management. Ethical leadership practiced in oil and gas industry will help the management to realize the risks at an early stage and take actions before all goes wrong (Josh, 2014). Ethical leaders will be able to lead the other employees into doing what is right and in this way risks will be easily managed.

Conclusion

To sum it up, it is more appropriate to say that most people in the world depend on the production of oil and gas for availing energy. Those with machines and factories have the highest rate of demand of oil and gas. Day after day the rate of oil and gas demand raises continuously and this has rise of various risks and challenges that faces oil and gas production in industries. Many accidents have occurred in oil and gas industries due to the risks that are noted and the management ignores them until the worst happens.

Many of the oil and gas industries tend implement the ethical management of risks so as to reduce accident incidents to the environment and within the industry. The major risk that has been noticed to trend within oil and gas industries is the risk of oil spillage where most of oil and gases leak through the tanks and the pipes that are used in transporting the oil to different stations. Industries tend to implement the ethical leadership programs in managing the risks by educating the employees on how to be responsible in handling their responsibilities and reporting any problem that is occurring within the industries so as to handle the risks at an earlier stage.

Oil and gas industries are recommended that they should adopt the ethics programs so as to educate all the employees on how to handle their duties and do what is right and avoid accidents within the industries. Those industries using faulty leak preventers are recommended that they should seek advice from experienced engineers and allow them investigate the pipes and tanks before storing the oil and gases. All the oil and gas industries are also recommended that they adopt the ethical leadership skills if they wish to improve the value of the stakeholders and maintain the good reputation of the company. Ultimately, the organizational ethical misconduct mentioned above, has for years been solved by the major construction business personnel by hiring foreign labor white required skills for accountability and responsibility at workplace. This act in turn, renders most of the Australians jobless therefore, ought to become more vibrant and accountable in the occupations, since losing the opportunity to be a part of the globalized economic growth created by the construction industries has led to mistrust and the unfaithfulness, as well as lack of workplace morals as governed by the labor laws in the organizational set up.

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