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Oil and gas has the highest bribery rate By Guy Chazan The…
Oil and gas has the highest bribery rate
By Guy Chazan
The oil and gas industry was subject to the most prosecutions for bribery and graft in the United Kingdom than any other sector over the past four years, according to a new survey.
The study by Ernst & Young found that of 26 completed cases since 2008, oil and gas made up nearly one-fifth of prosecutions. The industry saw five completed cases, compared to three each in the medical goods, insurance, engineering, and construction sectors.
Most of them involved payments made abroad, or kickbacks to foreign government officials.
With most oil and gas produced in third-world countries, the industry is far more exposed to the risk of corruption than other kinds of business. To cite one example, Nigeria, Africa’s biggest oil producer, and a place where Western oil majors such as Shell, Total, and ENI have been operating for decades, comes 143 out of 182 in Transparency International’s 2011 Corruption Perception Index. Angola another big African crude exporter where BP has a number of big projects is at 168.
Western oil companies are particularly exposed to the risk of corruption because they usually operate in joint ventures with state-owned entities or foreign governments and ‘are at risk of being liable for bribes or corruption by any partners acting on their behalf, Ernst & Young.
The issue of corruption has taken on added urgency with the advent of the United Kingdom Bribery Act, which came into force in 2010. The Act bans facilitation payments, which are widespread in developing countries and seen by many companies as an indispensable means of expediting often painful slow bureaucratic processes.
Many oil companies have instituted rigorous internal procedures to root out corruption, but Jonathan Middup, the United Kingdom Head of Ernst & Young’s anti-bribery and corruption team, said they often got their priorities wrong.
‘Companies spend a disproportionate amount of time and effort on compliance around corporate hospitality and facilitation payments, he said, ‘and not enough on third-party due diligence- what agents, intermediaries, introducers and joint-venture partners are doing in their name.’
Third-party risk, he said, is ‘constant and ongoing. ‘You can’t prevent other people from breaking the law, but you are liable if they do, he said.
The issue is particularly acute for oil companies because of the importance of multinational dollar procurement contracts in big oil developments. Constant vigilance is required to make sure contracts are not awarded to parties related to the companies’ joint-venture partners.
Source:
Chazan, G. (2015, 15 July). Oil and gas have the highest bribery rate. Financial Times.
Overview:
Recently, you met a potential client at an oil processing and extraction international foreign investment conference in Lagos Nigeria (high-context culture).
write a letter to a political government minister with the intention that your company will secure a contract. You are aware that the process to secure a contract will be competitive. However, your experience of doing international business in poor and developing regions such as Africa, Asia, and even South America, show that bribery to get favors is common. This is despite being illegal in developed countries and regions such as North America, Western Europe, Australia, and New Zealand.
The letter will be addressed to the Minister of Mines and Steel Development, Ms. Leslye Obiorah, 26 Luanda Crescent, Ademola Road, Abuja, Nigeria.
Question: (you should write option 1 or 2 as required bellow)
There are two letter options to choose from, and select the one you feel comfortable writing:
Option 1: This request letter should sound like financially seducing the minister and enticing her for ‘facilitation payment’ or ‘kickbacks’ from your company in return for contract favor. She is from a high-context culture. This letter should be indirect and yet conversational. It should be relational and intended to build a long-term friendship.
Option 2: This reply letter to the minister after your ‘back-and-forth communication in which she sounded like she needed ‘facilitation payment’ or ‘kickback’ from your company in return for her awarding your company a contract. In this letter, indirectly indicate why you consider her subtle request ‘unethical’. In an indirect way, educate her on why for example, the United Kingdom Bribery Act is in place. She is from a high-context culture. This letter should be indirect and yet conversational. It should be relational and intended to build a long-term friendship.
Important: You are from low context culture (Canada). You are dealing with someone from a high-context culture. You must be very indirect in your wording. Pay attention to the characteristics of goodwill messages.
