Managing Change of British Petroleum Essay

managing change in british petroleum CONTENTS: * A view of British Petroleum * A brief description of BP incident in the Gulf of Mexico. * Critical Evaluation of Potential changes that may take place in BP * Evaluation the importance of change and Potential problems when implementing change * Evaluation the effectiveness of BP strategy for managing change within the organisation * Conclusion * A view of British Petroleum British Petroleum also known as BP Amoco is one of the largest petroleum industries located primarily in London.

It is regarded as one of the top four petroleum and oil petroleum firms and establishment in the global market. BP plc (British Petroleum) is an international oil and gas company. The Company operates in more than 80 countries, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products. The Company operates two segments: Exploration and Production, and Refining and Marketing. Exploration and Production’s activities cover three key areas. Upstream activities include oil and natural gas exploration, field development and production.

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Midstream activities include pipeline, transportation and processing activities related to its upstream activities. Marketing and trading activities include the marketing and trading of natural gas, including liquefied natural gas (LNG), together with power and natural gas liquids (NGLs). Refining and Marketing’s activities include the supply and trading, refining, manufacturing, marketing and transportation of crude oil, petroleum and petrochemicals products and related services. BP ranks in the top three in terms of reserves in the global oil and gas industry with operations in Europe, the Americas, Asia, Australasia and Africa.

More than 70% of profits are generated in Europe and the United States but the company is also pressing ahead with new exploration and production operations in Africa, South America, Asia and the Caspian sea. BP is the largest retailer of gasoline in the US. Marketing as AMOCO in the eastern United States and ARCO in the west, it has about 17,150 service stations nationwide. Throughout the rest of the world the company has a network of 11,850 BP branded service stations, 1,525 in the UK and products on sale in 100 countries.

In the UK BP also supplies fuel to petrol stations at Safeway supermarkets. * A brief description of BP incident in the Gulf of Mexico. On April 20, 2010, a fire and explosion occurred onboard the Deepwater Horizon, a mobile offshore drilling unit owned by Transocean Ltd. and, at the time, operated for BP Exploration & Production, Inc. (“BP”). A huge explosion on BP’s Deepwater Horizon oil rig in the Gulf of Mexico killed 11 people on the night of 20 April 2010. Rescue efforts initially focused on saving the surviving 115 workers from the burning platform, about 50 miles from the coast.

As the platform, collapsed into the sea, the environmental cost started to become clear as with reports of vast amounts of crude oil gushing from the broken well head.. A survivor of the blast and fire later told of how he and other rig workers were kept at sea for 40 hours after they were rescued. At the time of the explosion, Deepwater Horizon drilling Rig was drilling an exploratory well at a water depth of approximately 5,000 feet (1,500 m) in the Macon do Prospect, located in the Mississippi Canyon Block 252 of the Gulf of Mexico in the United States exclusive economic zone about 41 miles (66 km) off the Louisiana coast.

Production casing was being installed and cemented by Halliburton Energy Services. * EXPLOSION: Explosion was During March and early April, several platform workers and supervisors expressed concerns with well control. At approximately 9:45 p. m. CDT on 20 April 2010, methane gas from the well, under high pressure, shot all the way up and out of the drill column, expanded onto the platform, and then ignited and exploded. Fire then engulfed the platform. Most of the orkers were evacuated by lifeboats or were airlifted out by helicopter, but eleven workers were never found despite a three-day Coast Guard search operation, and are presumed to have died in the explosion. Efforts by multiple ships to douse the flames were unsuccessful. After burning for approximately 36 hours, the Deepwater Horizon sank on the morning of 22 April 2010. As a result, the drilling riser running from the wellhead on the ocean floor up to the oil rig was destroyed. 24 April, Landry announced that a damaged wellhead was indeed leaking oil into the Gulf and described it as “a very serious spill”.

BP has not given a cause for the explosion. According to the US Congressional investigation the rig’s blowout preventer, a fail – safe device fitted at the base of the well, built by Cameron International Corporation, had a hydraulic leak and a failed battery, and therefore failed. * Spill flow rate To date, almost 116,000 claims have been submitted and more than 67,500 payments have been made, totalling $207 million. The cost of the response to date amounts to approximately $3. 95 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs.

On June 16, BP announced an agreed package of measures, including the creation of a $20 billion fund to satisfy certain obligations arising from the oil and gas spill. * Spill area Offshore oil and gas in the US Gulf of Mexico is a major source of oil and natural gas in the United States. The western and central Gulf of Mexico, which includes offshore Texas, Louisiana, Mississippi, and Alabama, is one of the major petroleum-producing areas of the United States. Identified oil plumes in the deep waters of the Gulf of Mexico, including one as large as 10 miles (16 km) long, 3 miles (4.  km) wide and 300 feet (91 m) thick in spots. The shallowest oil plume the group detected was at about 2,300 feet (700 m), while the deepest was near the seafloor at about 4,593 feet (1,400 m). Marine scientists from the University of South Florida had discovered a second oil plume, stretching 22 miles (35 km) from the leaking wellhead toward Mobile Bay, Alabama. 13 Jul 2010: BP to begin tests to close valves on new containment cap, amid hopes of a turning point in efforts to stop deep-sea gusher. BP oil spill: new cap ‘successfully installed’ on leaking well on 07-17-10 08:47 PM. Critical Evaluation of Potential changes that may take place in BP due to Gulf of Mexico incident Potential changes: -Strategic changes CEO Tony Hayward redirected BP’s strategy by setting new goals of upstream growth, downstream turnaround, and corporate simplification in 2008. Upstream growth centres on developing key project areas including the Asia Pacific region, Azerbaijan, Algeria, Angola, Trinidad, and the deep-water Gulf of Mexico. BP is focused on working closely with TNK-BP partners in its venture in Russia to support long-term growth.

Downstream turnaround and corporate simplification hinge on operating changes and adoption of best practices. * Technological changes oil spill cleanup technology Specifically, he asked Suttles for his reaction to the rapidly circulating info that oil spill cleanup technology is woefully behind the times, making the oil spill cleanup painfully inefficient. The lack of foresight by BP on the Deepwater Horizon Oil spill – or lack of sufficient motivation to invest in preventative oil spill cleanup technology measures – is obvious. -Financial changes * Cost: BP reported that its own expenditures on the oil spill had reached $3. 2 billion, BP’s liability for non-cleanup costs to $75 million, Nevertheless, some Democratic lawmakers are seeking to pass legislation that would increase the liability limit to $10 billion, and BP has agreed to allocate $100 million for payments to offshore oil workers who are unemployed due to the six-month moratorium on drilling in the deep-water Gulf of Mexico. BP executives agreed to create a $20 billion spill response fund. Analysts for Swiss Re have estimated that the total insured losses from the accident could reach $3. 5 billion. According to UBS, final losses could be $12 billion.

According to Willis Group Holdings, total losses could amount to $30 billion, of which estimated total claims to the market from the disaster, including control of well, re-drilling, third-party liability and seepage and pollution costs, could exceed $1. 2 billion. * Growth: We look for near-term gains in oil prices and production growth from new projects to support BP’s near-term cash generation. However, low US natural gas prices and still weak demand for refined products could serve as partial offsets. Rising oil spill recovery costs and potential liabilities could limit cash for growth projects over the next few years.

New limitations on deep-water drilling could dampen BP’s growth in offshore US. Longer-term, BP’s global portfolio of projects may help to drive earnings growth as product demand and prices recover along with the global economy. * Profitability: Profitability will depend on BP’s ability to fully utilise its assets while managing operating and capital costs. BP’s profit margins could be squeezed by low gas prices and low demand for refined products during the next few years. A global economic recovery could drive up oil and gas prices, and in turn boost margins.

However, near-term oil spill-related costs and longer-term potential regulatory and legal penalties could draw cash away from growth projects and pressure margins over several years. * Financial Health: As a result of decades of profitability and strong cash generation, BP has kept debt levels within its self-imposed limit of a 30% net debt ratio (net debt/(net debt & equity)). To meet current oil spill-related calls on cash, BP has access to a $6. 8 billion quarter-end cash balance and capacity to incur another $13 billion in new debt before exceeding its 30% net debt ratio limit.

Estimated cash from operations of over $30 billion per year may support annual dividends of $10. 5 billion and capital investments of $20 billion. However, uncertain future cash calls to meet potential regulatory or legal liabilities arising from the oil spill could cause the firm to incur more debt, and refrain from growing its dividend. * Legal changes BP looks set to be investigated by the Department of Justice after a group of eight senior American politicians called for a full-blown examination of BP’s alleged “civil and criminal” transgressions.

It is taking legal action to get BP’s Atlantis well in the Gulf of Mexico shut down. BP faces Government fines could send oil firm’s bill soaring in wake of Deepwater Horizon disaster. The issue of legal liability for the accident is complex, involving US federal and state laws. City analysts’ calculations of the bill faced by BP have ignored the potentially ruinous cost of civil penalties. * Management changes Changing the attitudes and behaviour of personnel (Employees) The oil industry employs about 58,000 Louisiana residents and has created another 260,000 oil-related jobs, accounting for about 17 percent of all Louisiana jobs. ince the crisis began; 108 of those cases involved workers in the oil spill clean-up efforts, while thirty-five were reported by the general public. MSNBC’s Countdown with Keith Olbermann that people along the Gulf Coast are getting very sick, with symptoms of dizziness, vomiting, nausea, headaches, and chest pains, not only from the first responders to the crisis, but residents living along the coast as well. since the crisis began; 108 of those cases involved workers in the oil spill clean-up efforts, while thirty-five were reported by the general public.

BP has threatened to fire their workers if they use respirators distributed by LEAN, though health and safety officials have not required their use, as they may exacerbate risks of heat exhaustion. * The stock market changes BP stock has suffered its fallen by more than 20%. The Deepwater Horizon oil spill has impacted BP (NYSE:BP) stock significantly with a more than 50% drop in its price since the beginning of the crisis, from a high of $59 to a low of $27 and a current price of just over $29. * Share price changes The first chart represents the closing price of BP from the past month (April 20 to May 17).

As you can see, shares have fallen from nearly $61 to $46. 57 ($45. 57 intraday on May17). A few days earlier, shares actually hit the year-high of over $62. * Evaluation the importance of change and Potential problems when implementing change Change management means to plan, initiate, realize, control, and finally stabilize change processes on both, corporate and personal level. Change may cover such diverse problems as for example strategic direction or personal development programs for staff. Change is the continuous adoption of corporate strategies and structures to changing external conditions.

A few years ago, explained Kincaid, he recognized the need for significant operational changes to secure the company’s position. Equity Office’s buildings were “managed as islands” with no common infrastructure to realize economies of scale. Normally, people perceive change processes in seven typical stages. The seven phases of change can be described as follows: -Shock and Surprise Confirmation with unexpected situations. This can happen by accident(eg: losses in particular business units) or planned events(eg: workshops for personnel development).

These situations make people realize that their own patterns of doing things are not suitable for new conditions any more. Thus their perceived own competence decreases. -Denial and refusal People activate values as support for their conviction that change is not necessary. Hence, they believe there is no need for change; their perceived competency increases again. -Rational Understanding People realize the need for change. According to this insight, their perceived competence decreases again. People focus on finding short term solutions, thus they only cure symptoms. There is no willingness to change own patterns of behavior. Emotional Acceptance This phase, which is also called ‘crisis’ is the most important one. Only if management succeeds to create a willingness for changing values, beliefs, and behaviors, the organization will be able to exploit their real potentials. In the worst case, however, change processes will be stopped or slowed down here. -Exercising and Learning The new acceptance of change creates a new willingness for learning. People start to try new behaviors and processes. They will experience success and failure during this phase. It is the change managers task to create some early wins (e. g. y starting with easier projects). This will lead to an increase in peoples perceived own competence -Realization. People gather more information by learning and exercising. This knowledge has a feedback-effect. People understand which behavior is effective in which situation. This, in turn, opens up their minds for new experiences. These extended patterns of behavior increase organizational flexibility. Perceived competency has reached a higher level than prior to change -Integration People totally integrate their newly acquired patterns of thinking and acting. The new behaviors become routine. | | | | | | | Only if change managers understand these phases of change, and only if they act accordingly, they will be able to successfully manage change processes without destroying peoples motivation and commitment. “Managing change is a very important factor in the success of every business. This guide will help managers to think creatively about how they manage change, whilst avoiding many of the pitfalls that other companies have encountered. ” This is the first part of the highly popular and widely used “Resource Efficiency & Corporate Responsibility – Managing Change” guide that is published.

Much of the advice in this guide is little more than the application of common sense and good management practice, but all too often some of these elements are overlooked. By taking a systematic approach to implementing change, managers can be more successful in taking staff with them and achieving their objectives. The four key factors for success when implementing change within an organisation are: * Pressure for change – demonstrated senior management commitment is essential * A clear, shared vision – you must take everyone with you.

This is a shared agenda that benefits the whole organisation * Capacity for change – you need to provide the resources: time and finance * Action – and performance – “plan, do, check, act” – and keep communication channels open. According these reasons, BP also needs to make managing changes incident which is in the Shock and Surprise (by unexpected event)step due to the Gulf of Mexico incident for -holding their image and Branding -changing external conditions. – adopting corporate strategies and structures -planning and controlling for Future -making customer satisfaction solving problems -making a successful management -For efficiency operations -achieving goals and objectives -making cost control Potential problems they face when implementing change However, BP faces greater uncertainty as the scope and cost of the oil spill cleanup remains unclear, as do potential regulatory and legal liabilities. Over the longer term, new safety regulations and technical challenges may slow down deep-water drilling in the US and perhaps even in Brazil and other ultra-deep-water fields. This could cut into production growth plans in these regions.

They are, Today, the petrochemicals industry faces three key challenges: * the need to manage the commercial environment better – and as a minimum to stop worsening the industry’s inherent cyclicality * the need for further restructuring in order to improve underlying performance * and the need to improve relationships with the outside world because crucially these relationships increasingly will determine the scope for success in our industry And other challenges are, * Financial problems Increased costs for changing, employee’s training cost, increased salaries, new technology charges and other charges for changing. Environmental problems people who have seen change efforts fail in the past, either at this or at other organizations, and assume if they keep their head down, everything will return to normal. Getting the active involvement of these people is essential. Lack of support: Many people perceive as a threat for their personal status. * Technology problems BP tried to install new technologies or systems of working without considering the impact on social systems (the way people work and interact with each other), or without giving thought to how the people who actually do the work feel about the changes.

The result is usually an expensive failure, with employee reactions ranging from simple misunderstandings (resulting in lost productivity or damage) to outright sabotage and organized labour actions. * Legal problems * Evaluation the effectiveness of BP strategy for managing change within the organisation The study of organisational effectiveness has long been the province of those in the management sciences. In recent years, however, workplace consultants and strategists have become increasingly interested in designing physical environments that promote organizational success.

Although there are many ways to measure success, a number of factors consistently show up in effectiveness metrics. These include the following: * Product/service quality and value * Customer satisfaction * Capacity for innovation and creativity * Adaptation to organisational and technological change * Effective information sharing and retention * Employee attraction and retention * Effective group and individual work * Quality of work life * Developing partnerships and alliances * Operational efficiency * Image and branding

For any given organisation, measures of effectiveness vary, depending upon its mission, environmental context, nature of work, the product or service it produces, and customer demands. Thus the first step in evaluating organisational effectiveness is to understand the organisation itself – how it functions, how it is structured, and what it emphasizes. British Petroleum, it is essential and significant that the industry must consider some operational strategies to be able to sustain their competitive leadership.

In this regard, though the company has been able top consider their own operations management system, there are still other systems in which the company can use to improve their operations in the global market and one of these is through the use of e-commerce. This guide includes tips and techniques that British petroleum can deploy to better manage change internally. The “Change Management Matrix” at the end of this guide is a simple tool for identifying and plotting status and progress in an organisation.

This should help you structure your process of managing change to get you from the raising of Awareness and Interest to Desire and Action. We are going to use The Force Field Analysis for the tool for understanding Driving Forces and Restraining Forces in Managing change. Force Field Analysis is a technique for assessing the factors that encourage & the factors that resist movement towards a desired target situation, thus allowing an assessment of the viability of the change, & suggesting action to alter the balance of forces, if necessary.

A Force Field Analysis involves identifying the factors or forces supporting and impeding movement towards a given target situation. In effect, it is a specialized method of weighing pros and cons. By carrying out the analysis you can plan to strengthen the forces supporting a decision, and reduce the impact of opposition to it. But, Difficulties are bounded in Force Field Analysis, they are: * Tend to be smaller scale * Are less serious in their implication * Can be considered in relative isolation from their organisation text * Have clear priorities as to what might need to be done Generally have quantifiable objectives & performance indicators * Have a systems/technical orientation * Generally involve relatively few people * Have facts which are known & which can contribute to the solution * Have agreement by the people involved on what constitutes the problem * Tend to have solutions of which type at least is known * Have known time scales * Are “bounded” in that they can be considered separately from the wider organisational context & have minimal interactions with the environment * Tend to be larger scale Have serious & worrying implications for all concerned * Are an interrelated complex of problems which cannot be separated from their context * Have many people of different persuasions & attitudes involved in the problem * Have subjective & at best semi-quantifiable objectives * Have an absence of knowledge of factors & uncertainty as to what need be known * Have little agreement on wheat constitutes the problems let alone what might be possible solutions * Have usually be around for some time and will not be solved quickly, if at all: bringing about an improvement may be all that can be hoped for. Have fuzzy time scales * Are “unbounded” in that they spread throughout the organisation and, sometimes, beyond. FORCE FIELD ANALYSIS WORK SHEET Forces against change| Score| | | Increased training Cost| 01| Staff frightened of new changes| 01| Leadership capabilities| 01| | 01| Complicated to implement| 01| Increasing wages| 01| Creation of new jobs| 01| Environmental impact on new | 01| Cost for changes| 01| | | | | | | | | | | | | Total| 09| Forces for change| Score| | | Image & Branding| 01| Product service quality & value| 01|

Customer satisfaction| 01| Customer needs changes| 01| Improve efficiency of strategy| 01| changing structure| 01| attractive customers| 01| New Governance| 01| Positive attitude| 01| Good Physical condition| 01| Achieving of long term goals| 01| Efficiency technology| 01| Increment of design & implementation| 01| | | | | | | Total| 13| Managing Change By taking a systematic approach to implementing change, managers can be more successful in taking staff with them and achieving their objectives.

This model has 3 steps: – Unfreezing – reducing strength of forces which maintain current equilibrium. (attitudes, beliefs, values) -Moving – developing new organisational values, attitudes and behaviours to help move the organisation into the new state/ Change in new behaviour. – Refreezing – stabilizing after the changes have been made so that there’s a new equilibrium. These changes would swing the balance of the Force Field Analysis from 11:10 (against the plan), to 8:13 (in favour of the plan).

The British Petroleum has 13:9 in favour of change : against the change). So, The British Petroleum can arrange for Management changes for holding image and Branding, increasing the value and quality, improving positive attitude, Achieving of long term goals, making Efficiency technology, attractive customers, increasing Customer satisfaction and Customer needs changes etc and resolving their problems. * Conclusion REFERENCES: 01. 459 of Money Week magazine. 02. ttp://www. ritholtz. com/blog/2010/06/missed-opportunity-bp-gulf-of-mexico-disaster/ 03. http://www. corporatewatch. org/ 04. www. oursouthwest. com. 05. www. guardian. co. uk 06. http://latimesblogs. latimes. com/greenspace/2010/06/gulf-oil-spill-boat-captain-despondent-over-spill-commits-suicide. html 07. http://www. nytimes. com 08. http://hbswk. hbs. edu/item/6433. html 09. http://www. guardian. co. uk/environment/2010 10. http://www. psywww. com/mtsite/forcefld. html 11.

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