Table of content

Executive Summary
...2
1.0 Introduction .
3
2.0 Identification of BPs Ethical dilemmas...
3
2.1 Deepwater Horizon oil spill..3-5
2.2 Prudhoe Bay oil spill.5-7
3.0 Evaluation of BPs Ethical
Dilemmas...7-9
3.1 Evaluation of Deepwater Horizon.7-8
3.2 Evaluation of Prudhoe Bay oil spill..8-9
4.0 Evaluations of BPs Best
Practices...10-12
4.1 Alternative Energy Program..10-11
4.2 Emission Reduction Program11-12
Reference

1.0 Executive Summary

The focus of this report is an audit of BPs actions, identifying and evaluating its ethical
dilemmas. It will include general information about the company, identification and evaluation of
ethical dilemmas based on the recent oil spills happened in Prudhoe Bay and Deepwater
Horizon.
To achieve some clarity, both dilemmas will be observed from the different stakeholders
perspectives. Furthermore, in the dilemmas evaluation phase utilitarian theory will be used to
determine whether BPs actions were ethical or unethical, using a relatively straightforward costbenefit analysis.
Finally, BP programs for the preserving natural environment and scarce resources for the future
generations which were launched after companys realization of its unethical behavior will be
discussed in the last part.
In summarizing, it could be said that the report will shed more perspectives on these serious
issues and could help the reader to have a better understanding on the problem as well as options
for action to solve the issue.

2.0 Introduction
British Petroleum is one of the worlds largest integrated energy companies, operating in all
activities which are connected with the oil and gas industry, which include exploring and
producing, refining, distributing and marketing these products to the world market. It is also
heedful of the renewable sources of energy, for instance, wind and solar power (BP, 2012).
Every day, BP produces almost four million,3,8 million, barrels of crude oil and natural gas, with
market capitalization of 135 billion, revenue of 386 billion, and 83 thousand employees in 2011,
operating in more than 100 countries and owning 27,800 service stations (BP, 2012). All of these
attest that BP is amongst the worlds most important multinational corporations.
Business ethics is a theory of how business and society are interconnected, being observed from
two points of views. Regarding to business, the goal of any business is to become involved in
profitable activities. Contrarily, society considers business as a part of society and its activities
should be acceptable according to society law and will not be harmful to society. In situations,
where it could be seen that some business activities result in profits for the company, but it could
be damageable for the community who are of special interest to business ethics. These kinds of
situations lead business individuals to make difficult decisions, called business ethical
dilemmas (Ghillyer, 2008).
3.0 Identification of BPs Ethical dilemmas
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The definition of Ethical dilemma, states that it is a situation that happens when two or more
social work morals are in conflict. BP scandals, like the environmental pollution and the unsafely
performance conditions discovered during the Prudhoe Bay and Deepwater Horizon oil spills.
These dilemmas have impacted on BP stakeholders.
3.1 Deepwater Horizon oil spill
The Deepwater Horizon, BPs Drilling platform in the Gulf Mexico, had an explosion on April
20th, 2010, which caused the largest oil spill catastrophe in the petroleum industry history. In the
accident 11 men working in the rig were killed, and 17 others suffered injuries. More than 150
thousand barrels of crude oil gushed into the sea, every day, for almost 5 months. Up to 68
thousand square miles of the Gulf's surface were covered (Burdeau, Cain, 2010).
There were many problems that contributed to the explosion on the rig, discovered during the
investigation of the oil spill by many non-governmental and governmental organizations that
proved BPs unethical behavior led to the disaster. But the main reason, in spite of the
recommended decision by Halliburton, one of the largest multinational corporations, providing
oilfield services, was not to install an oil platform. Nevertheless, BP continued the installation of
a drilling rig, even using the cheaper well design that some investigators considered as risky.
There is no doubt that many parties were affected, directly, or indirectly, with this environmental
disaster. Everyone who works in the seafood or tourism industries was obviously affected. The
pollution that led to the mutating and the killing the fish, put workers at the risk of losing their
jobs, subsequently, increasing seafood prices, affecting the restaurant and supermarkets industry,
as well. Moreover, the tourism sector was affected because people refrained from going to the
beaches covered in oil, staying away from water sports, or other fun attractions, meaning all
those involved in tourism, such as hotels, tour operators, restaurants, boat renting companies
were affected with the oil spill (BP, 2012).

Likewise, after the blow-out in the Deepwater Horizon, the profit figures showed disappointing
results, falling to 35 percent, as the result of increased expenditures and obligations for
individual compensation and penalties, thus losing revenue. It has damaged BP reputation and
finances, losing the faith" of investors and stockholders (Beam, 2010).
Moreover, besides losing investors, the company also started to lose customers. There was a
boycott campaign that started in the social media. Thus, the Facebook society gathered more than
75 thousand users who were negative towards BP. The massive oil spill also had the negative
influence on gasoline stations, affiliated with the oil company. For example, petrol stations in
middle Tennessee were facing boycotts from clients who were upset with the continuous spill
(Hayslip, 2010). Another owner of a BP station in Chicago had a 20-percent fall in sales at his
filling station during the disaster (Gutierrez, 2010).
Lastly, the absence of the professional behavior by Tony Hayward, the CEO of BP at that time,
could be observed, prejudicing the ethical behavior of BPs social responsibility. People could
see how he was enjoying a yachting holiday during the crisis, which created a negative image on
the whole administration of the company (BBC, 2010).
3.2 Prudhoe Bay oil spill
In late February, 2006 an explosion and subsequently oil spill happened in Prudhoe Bay, Alaska,
releasing 267 thousand gallons (1 million liters) of crude oil in the tundra of the Alaskas North
Slope. However, it was discovered only after 5 days. The disaster was the largest oil spill in the
history of this region. A pipeline corrosion problem was a cause of the rupture and leaking of oil.
The corroded pipeline was detected two years before the catastrophe and the London
headquarters were informed, however, they did not pay enough attention to correct the problem
(National geographic, 2010).

The oil spill significantly influenced many groups and institutions whether positively or
negatively.
Firstly, gasoline consumers were extremely affected, due to the cleaning cost which have been
paid by BP, thus increasing the price of oil, since the petroleum companies, jumped to $2.22,
closing at US$76.98 for each barrel, because of the budget cleanup expenditures and other costs
injected in their sale prices (CNN, 2010). Besides that, the accident created a shortage on the
Alaskan gasoline market because of the closing Prudhoe Bay oil facility, which produced,
approximately, 2.6% of the US demand for petroleum, again affecting the oil-product users
negatively.
Moreover, oil spill caused other oil-producing companies, because additional limitations were
imposed on the areas where companies can drill, reducing the total amount of demanded oil,
requiring additional extraction from places where work conditions are more difficult like, oil
shares. Also, there are numerous new restrictions on oil drilling and production in the future and
new regulation in Clean Water Act, the Clean Air Act and the Pipeline Safety Act.
This spill damaged the corporate image of British Petroleum, impacting the shareholders,
employees and its technologist. BP shares decreased in price, almost 2 percent. BP employees
and people in the nearest communities began to report about their health, complaining on the
symptoms such as often having headaches and chest pains, resulting from the cleanup and
released chemicals into the environment (Taylor, 2010). Furthermore, the cleanup techniques
have not been useful at cleaning up the pollution. Moreover, BP technologists were criticized for
oversighting the corrosion problem, giving them incentive to find better and faster way of
determine and stopping leaks in pipelines (Klein, 2010).
Next, society has become more provocative in the support of restrictions, like stricter limitations
on coal mining and carbon tax charges. Other party includes scientists because this incident has

given greater motivation for them to discover new ways of cleaning an oil spill, such as bacteria
that eats the oil and to research the renewable sources of energy.
Finally, knowing that North Slope region of Alaska is home to thousands of migratory birds,
caribou, and other habitants the spill had an enormous effect on the environment. The oil spill
covered, approximately, over two acres of snow-covered tundra and hard-frozen lake. Only the
cold conditions made it easier to clean up the area, affected by the oil spill (Rosen, 2006).
4.0 Evaluation of BPs Ethical Dilemmas
4.1 Evaluation of Deepwater Horizon
Next, from BP oil catastrophe, the oil spill in the Gulf of Mexico in 2010, arises the dilemma
between the saving costs by unnecessary risk taken and meeting safety criteria in the terms of
large number of fatalities on the platform rig. I am going to use the utilitarianism theory to
determine is BP actions were moral or immoral towards the society.
The Utilitarian theory states that an individuals actions should be based on moral rules, defining
whether an action, is morally relevant, or not. This theory concentrates on the consequences that
bring about the utilities and person should sacrifice some cost from them, in order for larger
group to gain some benefits (Ghillyer, 2008).
BPs oil spill minimizes the benefits of others who were affected as much as possible.
The coastal beaches and people, who were in the tourism and fishing industries, were damaged
seriously by the spill. The accident caused not only danger to peoples health, but it cost the
business millions of dollars. The oil that covered the marine ecosystem had a negative impact for
the decades to recover. In addition, the cleaning caused negative impacts as well, because of the
utilization of chemicals and the burning off the oil, led to creatures mutations and increased
mortality because of the oil and water pollution. Although of these attempts, the damage had
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already been and people are still suffering from the negative consequences that will continue for
years. Furthermore, BP has been fined because of their negligence.
Nevertheless, the BPs disaster has positively influenced peoples opinions of oil use, has had
people to consider about switching the alternative energy sources because they observed the
negative consequences to the environment from the oil spill. Moreover, the companys
representatives attempted to repair the damage by taking charge and providing a cleaning
campaign. These actions created benefits and many people have been beneficial from the
cleaning up activity, because the devastation of the marine and wildlife species being reduced,
the fishing and the tourism sectors could recover faster.
Alternatively, BP could be more concern about the construction standards of oil drilling rig.
Thus, it could save money on cleaning and other fines and invest in future projects, such as
alternative energy. Moreover, it could allow the decrease of the oil price by supplying more oil
products to the U.S. market. This would be beneficial for the economy, due to the fact that today
many industries include petrol in the list of their expenses. Thus, if the expenses would have
been less, the cost of the products also would have decreased. This alternative creates only
positive consequences, excluding any costs, except the some negligible expenses for the better
platforms construction.
In summary, according to the benefits and cost mentioned above I one can say that the utilitarian
theory suggest this BPs action was completely unethical because the oil spill caused only
harmful effects and no real benefits were provided from the disaster.
4.2 Evaluation of Prudhoe Bay oil spill
The Alaskan Oil spill arises the dilemma, the negligence of the companys board of directors,
together with saving money and the unnecessary risk that seriously affected the environment.
Using the utilitarian theory to comprehend, whether it was moral or immoral.
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No utilities were provided for this oil spill, neither to BP, nor to the society.
Firstly, because BPs negligent actions, cost the company a large sum of money, up to $20
million dollar fine. Secondly, it harmful affected the environment of the Alaskas natural
environment, home to numerous animals and birds. In the long-run could lead to the extinction
of one of the species, disinheriting future generations of seeing the beauty of our world. Next,
BP accepted the fine suffered damages of losing the revenue because of the stopping the
operation line and large amount of oil wasting, together with the large expenses for the cleaning
up. Furthermore, it increased oil prices that are harmful for the society and for the countys
economy as well, because oil products, such as petrol are inelastic products that are difficult to
substitute.
The benefits, described are all indirect. First of all, because people became more concern about
the consumption of renewable sources of energy, allowing to pay more attention and investment
in research and development actions. Moreover, it required the technologist to find better
methods to determine leakage in the pipelines, that in long-term will play a significant role in the
preventing other oil spills. Finally, owing to the spill, society and the government have become
more aware of BPs negligence towards the environment, employees and the security of their
assets, thus implementing new policies, restriction and rules for the gas and oil industries that
will help to avoid many environmental and safety performance issues of BP and other
companies.
The alternative actions that BP could have implemented in this situation, were to consider
employees concerns about the corrosion in the pipeline and to take appropriate measures to
remedy the defects in it. In this case company could avoid many problems, such as huge fines,
damaged image, unnecessary expenses, without hurting the environment and the US petrol
market. These could relate to the benefits of this action. The only cost would be the expenditures
to renew the pipeline.
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To sum up, renovation the pipeline in the right time could ensure BP in the consistent profit and
supply for the American market, making BP actions unethical.
5.0 Evaluations of BPs Best Practices
5.1 Alternative Energy Program
After the serious disaster in the gas and oil, BP tried to recover its image. Nowadays,
stakeholders are more concerned about toxic emissions, rising gas prices and pollution that
create a very unpleasant picture of the oil industry as a whole. Therefore, BP has chosen the
campaign to focus more on global warming and greenhouse emissions, supporting the right of
future generations for the clean environment, together with the saving the natural scarce
resources for later uses.
First, British Petroleum changed its name to BP and raising the range of alternative energy being
offered to the market. John Browne, ex-CEO of BP proclaimed (BP, 1998) that we are all
citizens of one world, and we must take shared responsibility for its future and for its sustainable
development. BP has become the first world global energy company to acknowledge the
problem of climate change.
Secondly, in 2005, BP launched its alternative Energy program. The company sees itself as a
going green by expanding its business and becoming more profitable to do so, going beyond
the oil and gas, investing money in the biofuels, wind and solar production sectors. For example,
in biofuels, BP produces ethanol, using the feedstock of sugar cane from Brazil. In addition, it is
developing technologies in order to use the energy of grasses as a source of the lignocellulose
ethanol (BP, 2010). For this program BP investments constitute of $8 billion until 2015, $5
billion of which has been already invested for acquiring a Brazilian biofuel company and another
Brazilian producer of sugar and ethanol that can produce 480 million liters of ethanol per an
average of year (BP, 2012). Moreover, the company invested over $500 million for the past 10
10

years in the Energy Bioscineces Instituted, where leading scientists find new and more efficient
ways to produce biofuels (BP, 2012). All of these enable BP to become the leader in the
production of biofuels.
Furthermore, BP embraces wind power, which is playing a significant role in the recovering its
image, because wind power is clean, safe, renewable and could remove approximately one
billions tons of carbon dioxide each year. Today, BP possesses eight wind farms that generate
more than 1,200 megawatts, providing electricity to a city with a population of 700 thousand
people (BP, 2012).
5.2 Emission Reduction Program
The world consumption of natural oil and oil products increases every year, showing a growth of
2.7% on average every year and the production of carbon dioxide, reaching 34 billion tones in
comparison to 23 billion in 2000 (Joint Research Center, 2012). Therefore, in 1998, BP chose the
strategy for reducing the amount of greenhouse gases emitted in to the atmosphere from its
operations over the coming ten years, regardless of the companys growth. By the tackling the
problem of global warming, BP has the advantage to become more ethical in relating to society,
doing its moral duty of protecting the welfare and the environment from its own harmful gases
emission regardless of its costs.
BP support policies stress the efficiency of the production and use of energy, because the amount
of energy used can have an effect on carbon dioxide emissions. Also, BP concentrates on the
support of lower-carbon, high-ponetional energy methods, such as solar and wind energy.
Finally, BP invests in technology research and innovations that could create lower-carbon
options for the future (BP, 2011).

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In 2012, BP invested $3.4 million in the Clean Air Agency for projects directed at emission
reductions in Whatcom, Skagit or Island counties of Washington state in the U.S. (Schwarts,
2012).
In 2011, BP participated in the Australian debate on climate change, cooperating with other
government and non-government organizations, in order to realize and impose potential policy
solutions. BP actions led to creating the clean energy legislative package, where they shared its
analysis of world energy projections, business impacts in nations where have been already
imposed carbon prices and knowledge of renewable sources of energy.
To sum up, after 10 years BP could manage to achieve their intentions and decrease the
production of carbon dioxide by 10% (BP, 2009). It can reduce emissions by almost 80 million
tones, owing to, combining better technologies, with simple operation efficiencies, such as
stopping leaks and eliminating the unnecessary burning of natural gas. The reduction can come
from various developments, which included the use of new technology, clean and renewable
sources of energy and the elimination of flaring. All of these testify that BP does it duties
towards the society about caring the environment and preserving it to the future generations.

Reference

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