Anticipating and Resolving Ethical Conflicts in Petroleum Exploration and Production

Peter R. Rose
Rose & Associates, LLP., Austin, Texas

Recent negative publicity about prominent E&P companies and related Federal legislation has focused public attention on reliability of oil and gas reserves estimates, the basic measure of an E&P firm’s real value. This problem has two components: (a) sound, uniform definitions and methodologies; and (b) professional ethics. Both are important, but this talk will address the ethical aspect.

Regardless of your occupation -- corporate employee, self-employed consultant, or private oil operator -- you should constantly remind yourself that you are first and foremost a practicing professional, with implicit and explicit obligations to your employers, clients, and investors. That is the first practical rule about E&P ethics.

So what does professional mean? A professional person is generally understood to be someone who continually pursues and becomes highly accomplished in some specialized occupation, ordinarily for monetary gain. Commonly involved in this pursuit are elements of learned study, personal dedication, and service to mankind, perhaps because the traditional professions were law, medicine, and the clergy; accordingly there are implications of trust in the term. With the rise of technology, the list of professional occupations has expanded and now includes such fields as engineering, architecture, and accounting, among others.

What is more important here than the definition is the concept of professionalism, which is an attitude -- the personal endorsement of consistently high standards of knowledge, work performance, and conduct. Professionalism requires capability beyond mere competence, and it requires a willingness to be accountable. Professionalism is inescapably intertwined with ethics.

Current popular ethics literature (Jacobs, 1992; Kidder, 1996; Carter, 1997) provides practical insights for the practicing professional for dealing effectively with real ethical problems, as well as for geotechnical novices, who may find themselves in ethical binds through mere inexperience and naiveté.

In today’s E&P business world, at least four main classes of ethical violations are apparent:

1. Simple Fraud, by knowingly and proactively presenting information that is false, misleading, or significantly incomplete,
2. Absence of Objectivity, by geotechnical/engineering staff, consultants, or operators, leading to overoptimistic or overconservative estimates of recoverable volumes, rates, costs, construction times, and profitabilities,
3. Disuse of Best Practices, where company procedures and policies mandate the use of advantageous, but outmoded techniques. Professionals are responsible for using best practices, company policy notwithstanding; deliberate ignorance is not an acceptable excuse,
4. Improper Use of a Professional’s Work by Others, such as supervisors, executives, or attorneys. Confronting such ethical conflicts may place the professional in a career bind, resulting in either resignation or ethical compromise.

Various strategies and remedies are suggested to help professionals sense, constructively defuse, or avoid emerging ethical problems before they become binary conflicts. Misaligned incentives often encourage unethical behavior. Several real, “sanitized” examples illustrate the real damage that ethical violations have caused, and suggest ways they could have been avoided. The most common remedy is clear and frequent thinking about one’s professional responsibility, in relation to ongoing work assignments.