Transparency in the Oil Industry

It’s been more than a year since the BP oil spill. The world saw and will see other such calamities like the Fukushima leak which bring out the corruption and utter lack of accountability and transparency to the fore. Those lives and disasters may not amount to naught if proper lessons are learnt.

I recently finished listening to a couple of podcasts: The essennce of the first one by Geof Heal, Prof at Columbia Business School and author of “When Principles Pay” about CSR and Bottomline, is laid out below.

1. Influence of Banking in Oil Industry

Prof. Heal alludes to the ‘Equator principles’ that were formed in 2002-03 to counter the major infrastructure oil & gas projects in developing countries financed by Citibank in US, Barclays in UK and ABN Amro in Europe – leaders in banking syndicate. Many western banks have joined since and many questionable oil projects have been rejected in Africa.

But, a lot of Chinese banks are financing the Chinese oil companies like CNPC in Sudan. He also talks about another Chinese company (doesn’t name it but one of the biggest) that wanted to get listed on the NASDAQ but faced huge oppostion from western NGO’s . So, on advice of Goldman Sachs, this Chinese company floated a subsidiary that had no questionable operations and got that listed and thus resumed its original operations.

Perhaps, banking has a role in influencing the ethical practices of oil companies.

2. Who needs to be transparent: Govt or private sector

In the 2nd podcast by Steven Mufson, a staff writer at Washington Post, he explained the intricacies that’ve been brought to light about the BP spill. The question is: Could BP had been more transparent in its actions that could’ve prevented the explosion and the spill?

Rig operations were owned by 3 entities: BP-65%, Anadarko-25%,  Mitsui -10%

Other companies that had a role in the rig:

Halliburton – oil services company – which reportedly didn’t inform BP of its 2 of the 4 failed tests of its cement.

TransOcean: owned the rig and the blowout preventer

Cameron: Maker of blowout preventer adhering to the specs – So, were specs of low standard as ordered by TransOcean?

BP: was the operator of the rig and did take some controversial decisions  and ignored warning signs. Steve goes on to explain those signs and decisions.

Govt: Minerals Management Service (MMS)- was the regulating agency that oversaw thousands of production platforms and 33 deep water rigs in that area – poorly staffed, low budgeted.

Was MMS doing its job properly? It took the royalties from the oil companies and also acted as a regulator – a disconnect. Also, there was inadeqate punishment for spills as laid by govt.

Since, there are a number of players, transparency only by BP will not help. It has also come to be known as BP oil spill.

3. Then, there is Shell’s case in Nigeria and Chevron’s case in Ecuador. Chevron polluted the ground water and its defense was that it complied with appropriate legal standards in Ecuador at the time – ironically, those standards were abandoned in 1932 in US.

This leads to: Does a company (oil or any) needs to comply only with legal obligations only or also consider the ethical obligations? So, a company can be transparent and operate in unjust manner and yet be complying legally.

Daniel Suchenski, a colleague at the MBA program and a fellow blogger, did some research on this and came up with a report by Transparency International and Revenue watch. These entities examined the policies of the 44 oil companies responsible for the world’s 60% of the oil production. 

The British newspaper ‘The Gaurdian’ highlighted those findings which raises questions of companies anti-corruption programs, international dealings and  internal organization of those deals.

(Image: US Coast Gaurd, from TreeHugger)


2 thoughts on “Transparency in the Oil Industry

  1. you should try to get the names of customers and credit card owners associated with the Denver Players brothel and look for MMS links

  2. Pankaj,

    We just wrote a 6 person Team Paper about BP in our last AU green MBA class – BUS 610 Capstone Project. It is Titled “BP and Corporate Responsibility – Is BP Responsible?” In the paper we addressd such topics as: Trails of Scandals and Accidents; Corruption and Greed, CSR Policies; Effective Makeover or Effective Rebranding?;Essential Elements for Repairing Reputation, Brand and CSR; Developing Appropriate Codes of Conduct. It is a very comprehensive paper.

    Former Classmate David Denning

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