Expert Investigations

Fraud remains a significant risk in the oil and gas industry, a sector known for its high-value transactions, global operations, and complex regulatory frameworks. From bribery to financial manipulation, fraud can occur in various forms, often with far-reaching financial and reputational consequences. With billions of pounds at stake, businesses in the oil and gas sector are prime targets for fraudulent activities that not only affect the bottom line but can also lead to long-lasting damage to a company’s reputation.

The Scale of Fraud in the Oil and Gas Industry

Fraud within the oil and gas sector can take many forms, including bribery, financial misreporting, asset misappropriation, and corruption. Given the large financial sums involved and the multi-jurisdictional nature of many transactions, detecting fraud can be incredibly challenging. The sector’s reliance on complex supply chains, long-term contracts, and numerous intermediaries creates ample opportunities for fraudulent behaviour to go undetected for long periods.

In the UK, fraud in the oil and gas industry has been on the radar of regulators and law enforcement agencies, with some cases making national headlines. The financial losses associated with such fraud are often staggering, and the reputational damage can be irreparable, particularly when high-profile companies or individuals are involved.

One of the most notable examples of fraud within the sector in recent years involved Glencore Energy UK, whose former head of oil trading was charged with bribery offences.

Glencore Energy UK: A Cautionary Tale

The SFO opened an investigation into Glencore in 2019, focused on the activity of the London-based West Africa desk. This desk sourced and traded in crude oil from countries across Africa. The investigation revealed how a lack of proper oversight and weak internal controls allowed the fraudulent activity to continue for several years, with millions of pounds in bribes allegedly being paid.

The case not only shocked the industry but also highlighted some of the vulnerabilities in global supply chains and trading practices within the oil and gas sector. It raised questions about corporate governance, the effectiveness of compliance programmes, and the level of scrutiny applied to high-level executives who may have access to sensitive information and decision-making power. As the case continues to unfold, it serves as an important reminder of the risks involved in the industry and the necessity of stronger anti-corruption measures.

Preventing Fraud in the Oil and Gas Sector

Fraud is a persistent challenge in the oil and gas industry, as seen in high-profile cases like that of Glencore Energy UK. Given the potential for fraud to cause significant damage, it is essential for companies in the oil and gas industry to adopt comprehensive measures to reduce the risks.

While the scale of the problem may be daunting, companies can take steps to mitigate risks and protect themselves from financial and reputational harm. By strengthening due diligence, improving financial oversight, enforcing anti-corruption measures, and fostering a culture of integrity, businesses can create an environment where fraud is less likely to thrive.

Though no approach is foolproof, a proactive stance towards preventing fraud — supported by effective governance, technology, and employee training — can make a significant difference. The oil and gas industry can reduce its exposure to fraud, safeguarding its future and its relationships with customers, investors, and regulators.