A raft of bribery investigations launched into US oilfield companies is likely to spur reform in the industry but will slow business in regions such as West Africa, it was claimed today.
The US Department of Justice is investigating possible violations of the US Foreign Corrupt Practices Act at large companies including Schlumberger, Halliburton and Transocean, according to filings with the US Securities and Exchange Commission.
All the firms have said they are co-operating with the inquiry.
"A lot of global companies have had to stop and think, 'maybe it's going to be harder' to do business in countries like Nigeria where corruption has been rampant," Marjorie Doyle, a practice leader with consultancy LRN.
High oil prices have triggered a rush to secure access to fields in countries where bribery of officials is often considered as a cost of doing business.
Last year, three wholly owned units of energy services company, Vetco, pleaded guilty to violating anti-bribery regulations and agreed to pay a record $26 million fine.
General Electric bought Vetco Gray, a unit of Vetco International Ltd., for $1.9 billion in January. Under the Foreign Corrupt Practices Act (FCPA) it is illegal for US companies or their agents to use bribery to win business in foreign countries.
Executives at companies under investigation will be called on to make expensive decisions. For example, Mr Doyle said the chief executive officer of Vetco stopped shipments to one country because of the difficulty in finding customs brokers who complied with anti-bribery laws. Deliveries took six months.
"We had to tell our customers, sorry we can't get parts to you," said Ms Doyle, who was a compliance officer with the firm at the time.
Ongoing investigations will also eat up a lot of time for top managers, whether those probes are internal or involve the government, she said.
Chad Deaton, chief executive of oil services company Baker Hughes, which pleaded guilty to FCPA violations earlier this year, said his company has good compliance controls in place, but the industry is due for big changes.
"It's an ongoing shift in our business. It's something we as an industry all have to make sure we're doing our part on," Mr Deaton said.
The number of prosecutions of FCPA cases has jumped in recent years. Between 2001 and 2006, the average number of new US FCPA prosecutions was over four times the average number in the preceding five years, according to a report from law firm Shearman & Sterling.
"This is a hot topic these days," Dan Newcomb, a partner at Shearman & Sterling, said. "I'm sure it will continue for a while, but I expect it to be cyclical. I think we will see even bigger prosecutions than we've seen so far, and they will change people's view of the risk-reward ratio."