Reliability Engineering Modeling and Analysis

Discuss about the Reliability Engineering Modeling and Analysis.

Introduction

Managing ethical risk is very important in managing accidents in all industries. This is especially important in the gas and oil industry where there are very many risks involved in the business. It is very important for management of companies in the gas and oil industry to put in place safety and disaster mitigation measures that help to reduce the outcome of risk in case it occurs. Ethics refers to a set of rules, procedures and practices that govern a particular group of people as they undergo their duties. Ethics exist in all industries and professions and they differ from one industry to another. Ethics in the gas and oil industry is a set of rules designed by the industry players and the regulator who is the government to ensure that activities and actions of companies in this industry to ensure they are sustainable and are in line with the safety and regulatory standards. Ethics in the gas and oil industry helps in preventing risk and accidents. Since the industry involves a lot of risks, it is important for companies operating in this industry to operate in line with these ethics so as to be able to manage risk in this industry(Pops, 2010). Ethical leadership is also very important for management of ethical risk in an organization. This is because organizations are led by people and it is important that these people lead by example. For ethical risk management to happen in an organization, the leaders of the organization must show the employees the importance of acting ethically and the repercussions of not acting ethically. An example is when the CEO of BP had to take responsibility for failing ethical risk associated with drilling the well in the Mexican gulf. Therefore it is very important for an organization to build the culture of ethical risk management through its leadership so as to help an organization avoid the risks associated with the business of the company.

From the case study on the BP and Exxon oil spills, it is quite clear that managing ethical risk is important in reducing risks in the gas and oil industry. The accidents that occurred in the gulf of Mexico and the Exxon Valdez proves that it is very important to manage ethical risks in the gas and oil industry. Both accidents resulted in massive loss of life and destruction of the environment. From the investigation of the Exxon Valdez oil spill, it was clear there was lack of ethical consideration which contributed in one way or the other to the disaster. The decision by the management of Exxon to hand over the captain of the ship to Joseph Hazelwood who was intoxicated amounts to a breach of code of ethics of the industry. After a test was done on the captain, it was established that his blood alcohol was at 0.06 hence violating the 0.04 rule. This meant that the captain could not be able to make concrete decisions and this resulted in a continued oil spill from the ship (Jacoby,2012). The fact that the ship was under the command of the Gregory cousins instead of Captain Joseph when it hit the iceberg and the leak started also provides there was a failure to manage ethical risk by the management of Exxon. This is because the Gregory brother was not experienced and qualified enough to navigate that ship and that why they made “unusual series of right turns”. if professionalism and ethics regarding the operation of sea vessels were followed and obeyed by both Captain Hazelwood and the management of Exxon, there is a very big possibility that this leakage could have been avoided. Companies in the oil and gas industry should adhere strictly to the regulations regarding the operation of machinery and equipment to reduce accidents in the workplace.

Managing ethical risks by stakeholders in the oil and gas industry helps in ensuring all people working in the industry are aware of safety precautions and areas of great danger that require them to be very careful when dealing with. This can be done through proper training and through continuous programs that will help employees understand all the risk involved in the workplace. This will help the employees to take due care so as to reduce the risk of accidents occurring.

Another way in which accidents can be reduced through managing ethical risk is by adhering to the quality standards set by the regulators in regard to the material used to construct the oil rigs. An example where ethical failures resulted in major accidents the BP oil spill in the gulf of Mexico. Investigations revealed that one of the causes of the exploitation is due to short cut procedures and testing using the pipe. The investigations into the disaster also suggest that the final procedure of laying the rig where the pipe is cemented could have catalyzed the explosion. Therefore the use of poor quality material by BP in order to save on costs could have contributed greatly to the accident. Therefore, in order to reduce ethical risk in this industry, it's important that players in the industry insist on using material of the highest standards in order to reduce the risk associated with low-quality materials (Troccoli, 2010).it is unethical for companies to use substandard materials or to avoid some important procedure during exploration. By becoming uncompromising on quality and protocol, companies in the gas and oil industry will be able to reduce accidents as a result of ethical failures (Papavinasam&Abayarathna, 2014).

Companies in the gas and oil industry can also be able to reduce accidents by putting in place clear and concise emergency response systems. Companies should invest heavily in emergency response teams and equipment to help deal with accidents when they occur or when signs of accidents occurring appear. This will help to monitor the state of the systems and operations to detect any faults so that they can be fixed. Emergency response also helps in reducing the losses that occur in case the accident occurs. If Exxon had well equipped quick response teams, the oil spill from the ship would not have been as huge as it was. The response by BP was also poor because the oil spill could not be contained until after four months.

There are very many risk factors that companies operating in the gas and oil industry face. Most of these risk factors are the same for companies engaged in gas exploration as well as those involved in the exploration of oil. These risk factors affect the industry adversely and the risk levels vary from company to company and depending on the environment in which they are operating. The fracking industry also involves many risks such as the risk of exploration, a risk of chemical contamination of water used in the process. A comparison of these risk factors helps to identify the similarities in risks faced as well as the differences in risks. BP and Exxon are involved in the exploration of both oil and gas and therefore, the companies have to deal and manage this risks on a day to day basis (Langlois,2011).

The major risk faced by companies such as BP and Exxon is the fluctuating world prices of gas and oil. For more than five years now, world prices for oil have been very low. The prices keep on changing from time to time and thereby making it difficult to predict price patterns. Failure to predict or dictate the prices of oil and gas makes it difficult for the companies to plan their revenues and expenditures. The companies cannot be able to accurately forecast the profit margins and this possesses a major risk to investments of the companies. Unstable prices in the for gas and oil have been caused by unfavorable economic conditions and high level of competition in the industry (Clews, 2016). Many countries that did not initially have oil have struck oil and this has also resulted to an oversupply of the commodity in the market. This risk is also faced by companies that use fracturing to explore gas. The prices of gas and oil have been fluctuating and this makes it very risky for such companies since sometimes the prices may fail even to cover the cost of production.

Another major risk that BP and Exxon face is the risk of environmental and health regulations. This has been a major area of concern for both the companies and the governments which regulate the industry. The nature of the industry means that environment is always at risk and therefore, there are various regulations that are put in place to protect the environment. Some of this regulations may be very strict and costly to implement and therefore weighing heavily on the companies budgets. The firms operating in the oil industry, therefore, are always at the risk of regulations that they did not expect and which may have a major bearing on their operations (Hokstad, Utne &Vatn, 2012). The same risk also faces companies using the fracking method to explore gas. Since the activity exposes the environment to various hazards, there are regulatory bodies that are formed to ensure that the companies in the industry uphold sustainability. These bodies may put in place cumbersome environmental restrictions that may affect the industry players.

Environmental pollution by itself is a very big risk for both BP and Exxon. The companies` major oil wells are located in the deep sea. This means that it is very risky for the companies in case a leakage occurs during drilling or exploration. The oil may cover the ocean floor and result in the death of animals and plants that live in the sea. An oil spill during exploration can result in loss of livelihoods especially for people who depend on the sea waters that both companies have operations. An oil spill can be fatal and costly for the company in terms of finances. An example is the deep water oil spill which cost BP more than $40 billion (Chatterji & Zsolnai,2016). Both BP and Exxon are also exposed to the risk of land and air pollution. This is because these companies operate oil wells which are located on land and therefore the drilling process involves digging which may interfere with the natural environment. The drilling of oil also requires machines which use a lot of oil products which pollute the air and environment in general. Just like BP and Exxon, companies using the fracking method of gas exploration are also facing the risk of polluting the environment. The environmental pollution risk for fracturing is, however, less compared to that faced by BP and Exxon in the oil industry (MUN, 2013).Initially, the method was thought to be environmentally friendly but concerns have emerged on the environmental hazards as a result of using the method. The use of the method results in the release of methane and other chemicals in the water near the drilling sites. Methane is also released into the atmosphere. The use of fracking in drilling uses a lot of water which may get exposed to chemicals such as hydrochloric acid, benzene and diesel. This may have adverse health effects on users.

The risk of life-threatening and injury causing an accident is also very high for both BP and Exxon. This because exploration and transportation of oil are risky ventures due to the fact that oil is a very flammable substance. It, therefore, means that a fire can be started very easily as a result of an accident or due to negligence by people working either in the rigs or the other facilities owned by the companies. The introduction of a simple spark can cause a major exploitation which results in multiple deaths and destruction of property. Other accidents can also occur during normal operations which may result in very serious injuries and even death. The risk of life-threatening accidents is also very high in the fracking of gas (Leigh, 2013). This is because, gas is very volatile and therefore, it is important that due care is taken and safety measures are put in place to manage this risks.

Ethical leadership can be referred to as the style of leadership where leaders guide other towards achieving a set of predetermined goals by focusing on the professional ethics and policies. The guiding principle in ethical leadership is the use of set rules and guidelines to carry out all activities that an organization involves itself in. Ethical leadership involves respect for values, behavior, and beliefs that affect the rights and dignity of other people. Ethical leadership in the gas and oil industry is very crucial in the management of risk that companies in this industry face. The following are ways in which ethical leadership can help to manage risk in gas and oil industry;

Through ethical leadership, companies are able to build an organization culture that is focused on the welfare of other people and not only on the core activities of the company. The gas and oil industry has many risks involved and these risks tend to affect a very big number of people in the society. Therefore, having a management team that sees and recognizes the need and the role of the society in the company’s activities will help to create an atmosphere of care and concern for the environment and for the people working in the company (Inkpen & Moffett, 2011). This will help in reducing the risk of accidents such as those resulting from fires which cause death to humans. Having ethical leadership in an organization will mean that the leadership is concerned about the safety of its employees. This will prompt the company to take measures that will help to reduce the risk associated with the companies` activities. This, in turn, ensures that the losses that may be incurred in case the risk occurs are minimized.

Another way in which ethical leadership can help in managing risks in the oil and gas industry is the adherence to quality standards and procedures. Ethical leaders will always ensure that no shortcuts are taken in the procurement of construction material. It has been noticed that negligence has contributed to some major disasters in the gas and oil industry. This has mainly been driven by the desire of managers in this industry to cut costs. This cost cutting measures compromise the standards of equipment and facilities used by the company and hence increasing the risk of accidents occurring. An ethical leader will also ensure that there is complete professionalism when undertaking the companies drilling activities and this, therefore, helps to reduce the risks in the industry (Nolan, 2010). This can be done by contracting companies that are very thorough and professional in their work. The materials used in the drilling of wells should also be supplied by companies that meet the required threshold.

Another way in which ethical leadership can help to reduce risk in this industry is through emphasis on thorough and continuous training and development program for employees. This can be initiated through ethical leadership to help ensure that all employees are updated on the most recent technological advancement on the operation of equipment in the oil and gas industry (Kolinsky, Robins& Viederman,2012). Continuous training on safety measures and emergency response will also help in preparing employees on ways in which they can deal with emergency situations hence reducing risk like that of fire.

Ethical leadership can help to reduce risk in the gas and oil industry by obeying and adhering to the regulations regarding environmental. Since environmental conservation and preservation has been a major issue for companies in the gas and oil industry, it is important for an organization to have ethical leadership. This is because ethical leadership helps in setting the goals and objectives of an organization. Ethical leadership also contributes very much to implementation of internal policies and strategies concerning the environment (Aven & Vinnem,2007). Therefore companies with ethical leadership will put in place policies to help the company protect and undertake programs that are geared towards conserving the environment and achieving sustainability. Ethical leadership will, therefore, reduce the risk of environmental pollution hence saving the company a lot of money and creating a favorable public image.

Conclusion

It is very important for companies operating in the gas and oil industry to be ethical in their activities. Ethics in the gas and oil industry ensure that companies are not only concerned about making profits but also about sustainability and the society in general. From the case studies on the deep water horizon oil spill and the Exxon Valdez case, it is quite clear that disregard of ethics in the industry led to major disaster in the industry. The Exxon oil spill was majorly due to failure by the management to uphold ethical requirements and values in operating of the ship. Allowing an intoxicated captain to take charge of the ship while he was drunk exposed the ship to a very big risk. Ethical values were also not followed when fixing the pipe in the BP oil in the Gulf of Mexico. This exposed the oil rig to a very big risk which would eventually result in a very big disaster that cost the company a lot of money. Ethical leadership is important in reducing risk associated with the gas and oil industry (Medrano Gonzales& pe?rez-mari?n, 2017). One of the ways in which ethical leadership reduces risk is by putting policies and structure in place to prevent occurrence of risk. This can simply be referred to as risk management. Ethical leadership also helps in creating an organization culture that encourages ethical behavior among all employees working in an organization. This would go a long way in reducing risk because employees are more ethical in all their undertakings.

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