The moral dilemmas of oil companies

February 21, 2011 | 00:00

The moral dilemmas of oil companies

With the unrest in North Africa and the Middle East spreading, some oil companies might ask themselves whether they are sitting on the wrong or right side of various fences. Depending on a company’s relationship with a regime, "regime change" can wreck investments – or create new opportunities. But in our fast-globalising world, the broader issue for energy companies to address is how moral issues should feature into their long-term strategic considerations, argues EER's editor-in-chief Karel Beckman.

With dozens, or even hundreds, of people dead in clashes in Libya, some tough questions will be asked in the boardrooms of companies like Eni, Statoil, OMV, Shell, BP, Wintershall and ExxonMobil. All these companies are active in Libyan oil and gas production. Some have invested many billions there. And like it or not, by doing so, they have associated themselves with the dictatorial regime of Muammar Qadhafi. So what if Qadhafi is overthrown and the people will decide to wipe out his heritage? Will they wipe out the investments of the international oil companies (IOC's) too? Those are no doubt some of the questions the IOC’s will be asking themselves.

They might ask themselves some additional questions, too. Wouldn't the people be right to throw out everyone who has ever worked for the dictator? And if so, aren't we wrong to be working with this guy in the first place?

Wikileaks

There is nothing new of course about oil (or other) companies working with or for dictatorial regimes. Nor is there anything new about populations rising up against dictatorships. What is new, however, is that the rest of the world is paying more attention than ever. With the rise of internet and social media, international public opinion is becoming an ever more potent force. As, incidentally, is the international justice system. When former US president George W. Bush has to skip a trip to Switzerland (!) for fear of being prosecuted, CEO’s of international oil corporations should start worrying.

History shows that misdeeds tend to be exposed sooner or later. And if Wikileaks is anything to go by, nowadays it’s sooner rather than later. Shell and Nigeria are a case in point. After Wikileaks revealed that Shell allegedly had been "spying" on the Nigerian government, parliamentary hearings were held in

When former US president George W. Bush has to skip a trip to Switzerland for fear of being prosecuted, CEO's of international oil corporations should start worrying
the Netherlands about Shell's involvement in that country. No doubt the media reports coming out of these hearings were prejudiced against Shell. Even Amnesty International got into the act, demanding that Shell do more to clean up the damage of broken pipelines in the Nigerian jungle. As if Shell enjoys spraying oil over the jungle of Nigeria! Well, no, Amnesty International – they are in the business of selling oil, not of spilling it.

Clearly for any honest observer the problems in Nigeria are overwhelmingly caused by corrupt government officials and ruthless rebels, not by Shell. But the question is – should Shell be operating in a country like that, torn by corruption and civil war? More generally – is it acceptable to produce oil in countries ruled by dictators, murderers and torturers (by which I don’t necessarily mean Nigeria)?

Apartheid

Historically, oil companies have never been too choosy about whom they did business with. And that is still true today. They may avoid certain countries, if they are put under heavy political pressure by their own governments (e.g. Iran today), but those are the exceptions. Shell and other oil companies had no objection to doing business with South Africa under the apartheid regime. Total never could see the point of leaving Burma. BP rushed back to Libya when it got the chance. All of them are now rushing to Russia and uncorking bottles with Igor Sechin of Rosneft, the man who, together with Vladimir Putin, threw Mikhail Khodorkovsky and dozens of other Yukos-employees in jail on spurious charges and then confiscated their property.

Of course there are always arguments. 'We have no choice. If we want to be in this business, we have to deal with the governments that control the resources.' Yes, but there is always a choice not to be in a

'Our responsibility stops at the gate'
business. 'If we don’t go, someone else will.' Sure, but then it's someone else's problem, not yours. Or the most hypocritical one: 'if we leave, the population will be worse off.' Maybe, but you won't know what the population wants until you have asked them. The real argument of course is, 'if we leave, we will be worse off.'

But, one may ask, how far do oil companies' responsibilities go when it comes to crimes committed by governments in countries they happen to work in? At a Christmas reception given by Shell for journalists, I once asked a former Shell-CEO what it had been like for him to have to socialise with people who had blood on their hands. He was not amused. My question was serious, though, and I remember very well his reply. 'Our responsibility', he said, 'stops at the gate'.

I could see his point. He was saying that Shell cannot be held responsible for misdeeds by people they don't employ and can't control. Fair enough. But the fact is that energy is a heavy politicised sector. Oil companies do not merely work in countries, they work with state companies that are directly controlled by governments. The revenues they produce directly support (often: prop up) these governments. They cannot close their eyes to these uncomfortable facts. Would anyone want to argue that it would have been right to work with the Hitler-regime?

Moral courage

Of course not all situations are as black-and-white as that. Governments operate in all shades of the moral spectrum. Every situation has to be judged on its merits. Is a government corrupt? Then a company may want to do all it can to avoid getting involved in this corruption. Does a government throw its critics in jail? Then the least anyone can do who works with this government is make clear that they don't agree. Does a government murder and torture its opponents? Then it may be time to get out the country – if only for the sake of one's own employees who have to work in this kind of environment.

Don't get me wrong. I have great admiration for the productive genius of many businessmen and entrepreneurs. I am, in fact, sincerely grateful to many of them for the wonderful work they do. But it would be even more wonderful if they displayed a bit more moral courage sometimes.

I sometimes dream of the day when business executives will stand up before a microphone and say what they believe is right and what is wrong, regardless of what any politician or government offical thinks. In our fast-globalising world, maybe they will soon be forced to make it clear where they stand. Indeed, in my more optimistic moods, I can anticipate living in a world where no one's responsibility stops at any gate.

 

Comments?

Agree or disagree with the above? Don't hesitate to share your thoughts with us. We are particularly interested in hearing the views of those who have first-hand experience with doubtful regimes. You can leave your comments on the website. You may also send a response to the author (karel.beckman@europeanenergyreview.eu) in which case we will treat it confidentially. Thank you!

 

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