Major Controversies Impacting the Oil and Gas Industry
Being one of the largest industries globally, developments in the oil and gas world have always received attention from the media. Whether it be various oil spills, new oil sources or oil price volatility as a result of geopolitical updates, oil and gas has been under the spotlight in most countries. As a result, controversies and scandals in this industry have been covered extensively over the years. This blog will deep dive into some of the biggest environmental and financial controversies which have taken place in the offshore industry and will look to analyse the resulting impact on the oil and gas sector.
Car Wash corruption row
Brazilian oil giant Petrobras has been the focus of corruption allegations as part of wider criminal investigations in a case known as Operation Car Wash. Named after the car wash that the operation was first discovered in in 2014, Operation Car Wash saw Petrobras accused of bribing politicians and political parties in Brazil and trying to conceal these payments from regulatory agencies and investors. The bribes were paid to secure contracts at inflated prices.
The US Department of Justice described the Car Wash scandal as “the largest foreign bribery case in history,” with $2.1bn siphoned from Petrobras in bribes and secret payments. In September 2018, the company reached a deal with the US and Brazilian authorities to settle longstanding investigations in the scandal. As part of the settlement deal, Petrobras agreed to pay $853.2m in penalties.
Shell-Eni Nigerian corruption case
In December 2018, Nigeria filed a $1.092bn lawsuit against oil companies Shell and Eni over alleged fraudulent practices and cases of corruption. Nigeria contended that Shell and Eni engaged in bribery and conspiracy against the country, claiming that the companies diverged billions of dollars of potential revenue from the Nigerian people.
The lawsuit relates to money Shell and Eni used to purchase interest in the OPL 245 block. It is alleged that this money was paid to Malabu Oil and Gas, a company owned by former Nigerian Minister of Petroleum Dan Etete, where it was then used for bribes and kickbacks. Reynolds Porter Chamberlain solicitor Tom Hibbert, who represented Nigeria, said: “This claim reflects the determination and ongoing efforts of the Federal Republic of Nigeria to recover the very significant sums lost to corruption and the unlawful activity of Shell and Eni in this transaction.”
The BP Oil Spill
The biggest oil scandal in recent memory is the Deepwater Horizon oil spill, better known as the BP oil spill. The explosion at the BP-owned Deepwater Horizon drilling rig offshore Mexico in 2010 killed 11 men and injured several others. The resulting oil spill is considered to be the largest in the history of the petroleum industry, releasing an estimated 4.9 million barrels of oil into the Gulf of Mexico.
Investigations following the oil spill revealed problems in BP’s administration that contributed to the disaster. In September 2014, US district judge Carl Barbier accused the company of wilful misconduct and gross negligence, ruling that BP had acted with “conscious disregard of known risks” and describing the company’s conduct as “reckless”.
Closing Comments
The above incidents are some of the controversies which have had an adverse impact on the major oil and gas players and how they function. While this has led to negative publicity for stakeholders involved, the environmental and financial costs incurred have hindered the growth of the oil and gas industry (and other industries like pipe fabrication, detergents, plastics etc.) over the years. With the rise in alternative sources of energy, oil and gas needs an image overhaul in certain areas going forward!