Oil Industry Esg

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Oil industry is vital to the modern society. Up to 30 billion barrels of oil is consumed for fuel and raw materials every year. This makes oil and gas industry as one of the largest industries in term of revenue. Yet, according to the latest Edelman Trust Barometer survey, oil companies are among the least trusted in the business world. (Edelman, 2016) From a Swiss research firm Covalence, one fourth of the twelve least ethical companies are oil companies. These findings show that the petroleum industry is actually scarifying the environment, social interest and corporate governance in order to satisfy the huge demand of oil and maximize profit.

The petroleum industry includes the global processes of exploration, extraction, refining, transporting, and marketing petroleum products. The most controversial environmental issue related to the oil industry is the extraction process. In developed countries, there are strict regulations for oil drilling. Oil must comply with those regulations and prevent the potential hazards to the environment. Otherwise they may be prosecuted and fined for billions of dollars. The Deepwater Horizon oil spill is a recent example. The explosion and sinking of this British Petroleum (BP) oil rig discharged 4.9 million barrels of oil in the Gulf of Mexico. Such a large scale oil spill in developed countries is rare but it is common in developing countries. Nigeria contains one of the highest concentrations of biodiversity on the planet. Its arable terrain can support a wide variety of crops, economic trees, and more species of freshwater fish than any ecosystem in West Africa. At the same time, Nigeria has a huge amount of oil reserve, ranking 11th on the planet. Despite the essential ecology, many oil companies drill oil in Nigeria without considering the adverse impacts towards the environment. Oil companies seldom repair the corroded pipelines and tanker to save cost therefore oil spills in Nigeria are a common occurrence. It is estimated that at least 9 million barrels have been spilled since oil drilling in 1958 causing 5 to 10 percent of mangrove forests wiped out. (Baird J ,2010) Soil and freshwater are also contaminated and affects the agriculture.  In Nigeria, environmental protection regulations are loose and rarely enforced in order to enhance the development of oil industry. As a result, the oil industry scarifies the environment for maximizing the profit.

Besides the environmental issues, oil industry is often blamed for human rights abuse in developing countries. One of the main reasons is that oil companies often ignore the interest and civil rights of local citizens. When oil companies construct oil rigs or pipelines for delivering oil and gas, they may need to occupy the farmland of local people. Those local formers often cannot receive an adequate compensation and lost their livelihoods. This triggers the conflict between oil companies and local people. The construction of onshore oil and gas pipelines in Burma is an example. The farming land was confiscated for the pipelines construction which sparked off the protests against this project. After that numbers of activists were arrested by the Burmese authorities. Some of them are even tortured and sentenced to the prison. Although it is the Burmese authorities who commit the violations, there is clear relationship among the authorities and oil company that those human rights violations are to ensure the future operation of oil pipeline. (Earthrights International, 2011) The situation in Burma is common and human rights violations in oil industry is ubiquitous. In 2016, 15 unpaid Indian seamen were found to be trapped on the MV Malaviya Seven, a BP-charted offshore oil supply vessel. This highlights the problem of forced labor in oil industry. (Neil Thompson, 2016) In response to the oil price crisis, oil companies are eager to cut cost by recruiting cheaper labor in developing countries such as Philippines, Indonesia or India. The job to supply cheapest labor is subcontracted out to smaller companies or even “gangmasters” in those countries. Due to the underdeveloped labor law and legal enforcement, those subcontractors can easily coerce individuals to work through the use of violence or intimidation such as threats over debts, a worker’s immigration status or the confiscation of identity papers. The above social impacts related to oil industry is only a tip of the iceberg. The situation will continue if the industry keeps the current practices.