Six court cases in the U.K. and one in Norway in the past 3 years have revealed a network of corruption in bidding for oil industry engineering contracts.
The cases involved illegal information brokers, who buy and sell confidential information that can sway the award of contracts. Usually they work through agents within oil companies, contractors, and suppliers.
Oil Industry International Exploration & Production Forum, London, an industry association dealing with worldwide E&P regulatory agencies, has decided to raise awareness of corruption in contract bidding.
"Illegal information brokers are cockroaches," said Jeremy Haslam, contracts, purchasing, and material manager for ARCO British Ltd. "If we shine a bright light on them, they will go back into their crevices."
Information brokering is not new, Haslam said. "It has probably been going on since the pyramids were built."
But today it is a sophisticated operation, based on an offer that is difficult to refuse.
NO WIN DEAL
"Typically, bidders are approached with an offer of information that can win a contract," Haslam said. "Those who refuse to buy the information are told they will as a result be guaranteed not to win the contract."
E&P Forum is concerned that reporting such offers to the police is not as common as it should be. Illegal brokering is reckoned to cost the industry 35 million ($52.5 million)/year in the U.K. North Sea alone.
Haslam reckons projects worth more than $20 million will attract the attention of information brokers. The forum estimates illegal brokering can add 3-5% to the price of a project.
Ted Hansford, senior security adviser at Exxon Co. International, said police reckon there are more than 50 illegal information brokers operating in Europe. "And this is not an overestimate."
E&P Forum claims restrictions on media coverage of court cases have limited industry awareness of illicit information traders. So the operators' group has produced a video and educational package aimed at all oil industry companies.
SYMPTOMS
Among symptoms of illegal information brokering during bidding, E&P Forum lists unqualified companies on the bid list, unnecessary requirements in tenders, late changes in specification, significant changes to bids after clarification, and excessive life styles of employees.
Haslam said all those symptoms could have a legitimate cause. Hansford said there is a danger, as when looking through a medical encyclopedia, of deciding wrongly you are ill, after convincing yourself you have numerous symptoms.
Among methods of outfoxing information brokers, E&P Forum lists good security in the office, controlling access to computer data, separating commercial and technical information in bid packages, and a ban on entertainment during bidding.
Forum officials are unable to gauge accurately how far illegal information brokering has spread in the oil industry.
So far, my research has turned up only one region where it is possible to put a figure on corrupt contract processes. One source said in Russia illegal brokering affects contracts 100%.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.
