BP's Deepwater Horizon Supply Chain: Supplier Complexity May Be Part of the Blame

oil rig
Image Credit: Enterprise Irregulars, original source unknown

Today's earlier Friday Rant sparked a response from GE, who asked that we clarify that they in fact had no part in the creation or supply of the blowout preventer (or controls) that failed on the ill-fated BP gulf rig. The person who contacted us also directed us to this list of Deepwater Horizon specs / suppliers / contractors. The background on the tier one supplier partners and components in the rig construction is quite fascinating if you look at the included list and begin to analyze the extended supply chain implications. We share a few key suppliers below:

  • Reading & Bates Corporation is a tiny (~20 employees) Texas-based company that "provides contract drilling services in major offshore oil and gas producing areas worldwide. The company's offshore drilling fleet consists of 9 international class jack-up drilling units, 5 semisubmersile drilling units and 2 self-erecting drilling tenders," according to business.com -- and they were in charge of the design for the Deepwater Horizon.
  • Hyundai Heavy Industry Shipbuilders, in charge of building the rig, is "the world's number one shipbuilder, [and] leads the shipbuilding industry with a 15% share of the market ... The Shipbuilding Division is capable of building all types of ships to meet various demands from its clients. It has nine large-scale dry docks with seven huge 'Goliath Cranes.' Since the shipyard's groundbreaking in 1972, Hyundai Heavy's Shipbuilding Division has garnered many awards and set many records within the shipbuilding industry," according to their website.
  • Hitec supplied the drawworks and motion compensator, and Varco and Brandt, divisions of the National Oilwell Varco Company (NOV), supplied various mechanical parts as well.
  • Hydril, now GE Oil & Gas, Drilling & Production, provided the diverter, and Cameron International supplied the blowout preventer.

...and the list goes on. And on. It's obviously very safe to say that what we've listed here are but a handful of the tier one suppliers in BP's supply chain, and that GE, Varco, Brant, etc. had additional suppliers who in turn had multiple suppliers. Therefore, the complexity of the "blame game" goes far, potentially far beyond BP, and deep into the multi-tier supply base. Figuring out "what went wrong" in this situation -- and if any faulty products, components, materials, etc. were to blame in part or in whole -- will be a much more intricate and complicated process than many people believe, and will require heavy research and (I'm sorry, I had to) drilling down into the supply chain to discover what happened, where, when, and how it can be mitigated in the future.

Finally, the ultimate question is -- who has the legal responsibility for this disaster?

Spend Matters has focused a lot on supply risk in the past few weeks, and it seems that it'll be a trending topic for quite some time. Now is as good a time as any to really sit down and actually take action toward understanding your supply chain to mitigate risk and insure against any sort of disaster, on any size or scale. In most cases, these efforts will save and protect your shareholders. In other cases, you might end up even savings lives.

Sheena Moore

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