Bribery probes seen changing oil services business

By Anna Driver

HOUSTON (Reuters) - A raft of government bribery investigations launched into U.S. oilfield companies is likely to spur reform in the industry, but will also preoccupy top executives and slow business in regions such as West Africa.

The U.S. Department of Justice is probing possible violations of the U.S. Foreign Corrupt Practices Act anti-bribery law at large companies including Schlumberger Ltd (SLB.N), Halliburton Co (HAL.N) and Transocean Inc (RIG.N), according to filings with the U.S. Securities and Exchange Commission.

All of those firms have said they are cooperating with the government.

"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 who is a former compliance officer hired by Vetco International Ltd.

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 Vetco units pleaded guilty to violating the anti-bribery provisions and agreed to pay a record $26 million criminal fine.

General Electric Co (GE.N) bought Vetco Gray, a unit of Vetco International Ltd., for $1.9 billion in January.

Under the Foreign Corrupt Practics Act, or FCPA, it is illegal for U.S. companies or their agents to use bribery to win business in foreign countries.

TOUGH CALLS

Executives at companies under investigation will be called on to make costly decisions. For example, 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," Doyle said. "It's tough, it's hard."

Ongoing investigations will also eat up a lot of time for top managers, whether those probes are internal or involve the government, Doyle said.

Chad Deaton, the CEO of oil services company Baker Hughes Inc (BHI.N), 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," Deaton told reporters at a conference on Wednesday. "It's something we as an industry all have to make sure we're doing our part on."

In fact, Deaton said that he has already seen some of Baker Hughes' customers "in a lot of areas" make positive changes. He cited the Middle East as one of those areas.