In numerous occasions, failures of companies are attributed to the fact that they inadequately perform their functions. Arguably, the inadequacy in operation is connected with the complacency of the organization. On the other hand, it may result into mishaps that are environmentally unfriendly, as well as endanger the lives of the workforce. Consequently, the affected company may subject itself to public appraisal, as well as doubts in delivering the stipulated services. With regard to Shell Global, this paper seeks to establish the cause for the Alaska mishap, resulting into the disruption of oil drilling.
The paper seeks to present the problem that has resulted into the grounding of the Alaskan rig, as well as provide an overview of Shell Global that offers a wide range of products and services to its clientele, and deals with aviation fuels, bitumen products, oil and lubricants, as well as shell chemicals. The company faced a great problem and the respective losses due to the failure in the work of one of its departments
Overview of the Company’s Business
Shell Aviation is responsible for providing gasoline, turbine fuels and power fluids for the aviation industry. Additionally, it offers aviation fuel additives, which eliminate undesired effects in aircrafts. Moreover, the company offers Aerojet, being a premium aviation fuel service (Shell Aviation n.d.).
Shell Chemicals is among the largest petrochemical suppliers in the world. Its products range from basic petrochemical building blocks, like ethylene and propylene, to intermediaries that include solvents, ethylene glycol, as well as detergent alcohol.
Shell Global is responsible for the manufacturing of bitumen, as well as asphalt applications for road and paving contractors. Bitumen is essential for the carpeting of roads in many countries. As such, the company is the leading provider of this substance, due to many firms are dependent on the product. At the same time, Shell Global collects a lot of revenue from the sale of bitumen.
Furthermore, the company is responsible for providing oil and lubricants to the automobile industry. These substances should be available in the engines of all automobiles. As such, the company is the main supplier of the ones in numerous states. Consequently, it has a range of filling stations that offer oil, lubrication, as well as, fuel filling capabilities.
Shell Global holds numerous shareholders and global investors, from which it receives revenues for various oil expeditions. As such, the company obtains a lot of revenue that supports its business ventures providing products and services (2012 investor factsheet 2012).
Shell forms a global energy group and involves petroleum companies that employ 90,000 workers and operate in over 80 countries. Therefore, the organization meets the world augmenting demands for energy through economic, environmental, as well as social responsibility means.
Source of the Problem
Shell Global faced tremendous losses, when the drilling ship Kulluk ran aground on the shores of Alaska, after tugboats pulling it to Seattle had broken. Prior to the grounding, the crew had struggled for their lives for a period of five days among waves and winds with the speed of up to 70 mph to tow the rig to the safe harbor. Tentatively, the salvaged crew finally pulled the rig to Kiliuda Bay (Goldenberg 2013).
The delivering of a towline to Aiviq was almost impossible, due to weather conditions were not favorable. The cable was meant to prevent the drifting of the disabled vessel in shallow water, where the latter could run aground. As a result of the heavy sea, strong winds, as wel as, the sheer mass of both the vessel and Aiviq, caused the towline to part and be tangled in the ship’s port propeller. As such, multiple failures only highlight challenging conditions created by the sea, wind and sheer bulk of the rig.
Failure of the Company
On the other hand, the Kulluk grounding was partially a company’s interdepartmental problem. Reportedly, it occurred that the Shell Oil Company’s decision to transport the oil drilling platform ship named Kulluk to Seattle was in an attempt to evade the payment of Alaskan state taxes. Consequently, if the rig had been in Alaska, it would have required $ 6 million of taxes (U.S.: Shell risked moving drill ship in storm to avoid paying millions in taxes 2013; Pauline 2013). The company anticipated saving transportation costs connected with the damage of the rig.
It presents the idea that Shell Global has no commitments to the state, where it operates, but shifts its assets globally, or from the state to evade fees and taxes. As such, the company risked moving the drilling rig despite possible hurricanes and Arctic storm conditions with strong winds and high sea, risking the workforce and assets (Broder 2013).
Additionally, the weather forecast and analysis department was not proficient in establishing correct weather conditions that facilitated the moving of the drilling rig. State-of-the-art forecasting techniques presuppose the use of ensembles (output of numerous models) that present uncertainty information, as well as, the measure of the accuracy of a forecast. The NAEFS (North American Ensemble System) depicted wrong assumptions of the company’s forecast. The meteorological situation in the North Pacific region and the Gulf of Alaska depicts these zones the stormiest on the face of the planet. Arguably, a Shell Oil spokesman said that the forecast indicated a favorable two-week weather window. It was at odds with the facts, due to other forecasts suggested the potential of a big storm during the three-four-week voyage to Seattle. Secondly, the forecast skill showed a drop in four or six days. Thus, there was no guarantee of fair weather conditions.
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Consequently, the Canadian ensemble system reported the wind speed of 40 km per hour. It also depicts unfavorable weather conditions. As such, the meteorological department of Shell Global was inadequate in performing. Catastrophic failures occurred due to the poor analysis that exposed the drilling rig to adverse conditions.
On the other hand, the vessel reported an engine failure that resulted into the difficulty of operation in the raging ocean. It was fatal for the company due to numerous adversaries that had faced the drilling rig. Consequently, the engineering department failed in delivering its services.
As a result of the drilling rig calamities, the company incurred great losses. Shell Global spent 300 million dollars un upgrading the Kulluk rig (US: Salvage operations begin on Shell’s Arctic oil drilling rig Kulluk 2013). Consequently, the drill suffered from a considerable damage. Thus, it turned out to be almost impossible to find an alternative, as well as receive numerous government permits required to resume drilling in July as anticipated. According to the Department of Interior Rules that governed Arctic drilling, the company ought to have two rigs on site at all times to offer a backup vessel in drilling a relief well in case of a blowout (Mindel 2013).
Certainly, as a result of an endless series of blunders in the Arctic region, Shell’s reputation was undermined due to the Kulluk rig. As such, company’s competence was in question, in addition to its approach to offshore safety that claimed lives of offshore workers (Donovan 2013).
As a result, the President Obama’s administration ordered a far-reaching review of the strategy of Shell Global to drill in the Arctic region after a sequence of mishaps ending with the New Year grounding of the company’s Alaskan rig. Arguably, the review and investigation into the grounding of Kulluk raises the likelihood that after six years of massive investments and $5 billion aimed for trying to dig out oil in harsh and isolated conditions, Shell may have to re-evaluate its drilling plans. Consequently, the thorough review would be one of the most complex moments for Shell, since it started the Alaskan oil exploration in the Beaufort and Chukchi Seas last summer: a sequence of equipment breakdowns, and safety and environmental violations (Goldenberg 2013).
However, announcing the review, the U. S. Department of the Interior said that it would determine whether the company is ready to operate in harsh Arctic waters. The director of the Bureau of Ocean Energy and Management asserted, “Our review will look at Shell Global’s management and operations in the Beaufort and Chukchi Seas” (Goldenberg 2013). Arguably, the research will take place during 60 days, evaluating Shell’s capability to handle harsh Arctic waters.
The review would pay attention to the series of accidents that resulted from the grounding of Kulluk, including the substandard test of its made-to-order oil spill, equipment breakdowns, and safety and environmental infringement aboard the ship Noble Discoverer, the barge Arctic Challenger, and the Kulluk drilling rig. On the other hand, Shell Global’s safety and environment performance will come under a supplementary analysis with separate U.S. coast guard exploration during the grounding of its drill rig.
As a result, the public has learnt of Shell’s incapability in its operation in the Alaskan waters. Shell will have no possibility to embark on any explorations in the near future. Senior Attorney for the Oceana Conservation group asserts, “There is no way Shell should be allowed to drill into hydro-carbon bearing zones in 2013 or the foreseeable future” (Goldenberg 2013).
The review can clear the way for additional restrictions imposed on Shell Global. Eleanor Huffines says the following:
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We would like to see training, equipment and spill response standards that geared towards the reality of the weather, the remoteness of infrastructure, the fog, the sea, the winds – all those things that you are not going to encounter in the Gulf of Mexico. (Goldenberg 2013)
Arguably, the grounding of the rig was the latest in a string of setbacks happening in the Alaskan waters. Arctic groups reported repeat gear drawbacks. Thus, the oil company’s failure to meet air pollution standards should be a warning sign.
As a result, even without the review, Shell has faced harsh challenges to recommence its billion-dollar pursuit for Arctic oil. It is uncertain whether Kulluk can be revamped for any drilling next summer. Even if it happens, Shell Global will have return to the Arctic waters, and there are not many vessels capable to handle elevated waves and floating ice in the region. Certainly, all mounting costs and the panorama of more rigorous regulations for the 2013 season may even convince oil companies in the Arctic zone. Despite the fact that the Obama’s administration has prompted the review of the challenges facing shell, the company receives critique from its competitors. Questionably, the capability of Shell Global to deliver is under scrutiny.
Conclusively, the failure in the Arctic region raised numerous questions concerning the causes of the failure of Shell Global. Arguably, the grounding of the drilling was a result of the company’s drawback, as well as adverse weather conditions. Tentatively, the organization failed in acquiring proficient weather updates to assist in the navigation of the oilrig. As such, the main reason is the interdepartmental failure due to numerous faults in its operation.
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