Society of Petroleum

Engineers

Engineering Professionalism
Committee
Ethics Sub-Committee
2006

Why Ethics and Engineering

The engineer as a professional is dedicated
to improving competence, service,
fairness, and the exercise of well-founded
judgment in the ethical practice of
engineering for all who use engineering
services with fundamental concern for
protecting the environment and
safeguarding the health, safety and wellbeing of the public in the pursuit of this
practice.

This presentation brought to you by:

Ethics Sub-Committee
Members
Steve Hamburg
Greg Rowe
Dean Warnken
Wayne Wisniewski

How to Use the Material:

For Self-Study

Read the first 11 slides of this presentation

Display the first relevant Realistic Situation question
Think about:

What your action(s) would have been before reading the first 11
slides
What your action(s) would be after reading the first 11 slides
How you would explain your action(s)

Review the answer slide in yellow font

Continue through all 20 question and answer slides
Document date and location of review for future
reference

Why should I study ethics?

Adaptation for current business

environment on corporate governance.

Increased governmental legislation on
industry.
Fulfillment of chartering, registration, or
certification requirements on Ethics
training. Provide vehicle for required
training for SPE members.

 Better alignment with other professions

(Attorneys, Accountants, Physicians)

where public interest is involved. Other
engineering organizations have ethics
education for membership
Provide resource for SPE membership on
ethics training and guidelines.

Provide suggested methods, materials and

communications dealing with ethics:

Section Speakers
University Training
Web-based Training
Distinguished Lecturer
Audio-Visual Material for Training/Discussion
Newsletter Articles for SPE Sections
Article(s) for JPT Case Studies
Outsider Education

Ethics Decision Framework

Ethics can be complex, without a clear

answer. The Decision Framework

developed by the Ethics Sub-Committee is
proposed to enable the petroleum
professional to make sound decisions on
complex ethical issues.

Decision Framework
Ask yourself:

Would the resulting action be legal?

Would stakeholders see the action as responsible
stewardship?
Would I feel good about the resulting action?
Would I mind having information regarding the
decision publicized?
Have I consulted with peers/others regarding the
perceived action and possible ramifications?
Would the public view the perceived act as a
responsible professional action?

Question and Answer

Session

Some Realistic Situations

Question 1
I was told that I could hire a consultant to

take care of getting all the permits we

need from a foreign government. He
requested a $40,000 retainer and said that
he would use the money to help move the
process along. Since we dont really
know where the money is going, do we
have to worry about it?

Some Realistic Situations

Answer 1

Yes. You should know enough to find out if your

consultant is getting an unfair advantage on the
competition. Is it customary for conducting
business in this foreign government or a onetime deal to get special favors? One must
balance ethical considerations with the realities
of doing business in many foreign
marketplaces. Acceptable behavior in one part
of the world may be very different from your
normal operating practices at home.

Some Realistic Situations

Question 2
I have just received an invitation to attend

a hearing of a governmental/local authority

committee as an expert industry witness.
How should I respond?

Some Realistic Situations

Answer 2

You should use your best judgment as per the

expertise required to testify. By definition, an
expert is one that has achieved a high degree of
skill or knowledge as a result of their experience
and training. Will the testimony be in your area
of expertise? Do you have sufficient education
and a long track record of industry experience in
this area? Does your company and/or peers
recognize you as an expert?

Some Realistic Situations

Question 3
It is the last week in the quarterly reporting

period. My boss wants to make sure we

meet our numbers for the quarter, so he
asked me to record an unconfirmed sale
now that wont be finalized until next week.
I guess this wont hurt anyone should I
do what he says?

Some Realistic Situations

Answer 3
You must make a judgment call.

Is this a
common practice or a first-time request?
Does it put your department at an unfair
advantage in the metrics? Would you
mind if other departments or senior
management found out? It is suggested
to consult peers on the proper way
forward.

Some Realistic Situations

Question 4
My teams year-end results are ahead of

budget. A piece of new non-material

equipment is due to be purchased and
delivered in early January of the new year.
My plant manager has asked that the
invoice for the equipment be accrued out
of this years budget. Is this OK?

Some Realistic Situations

Answer 4
Is this a common practice or a first-time

request? Are you breaking any tax laws?

Is this an illegal ploy or good, solid
financial engineering? It is suggested to
consult peers and perhaps tax/finance
professionals on the proper way forward.

Some Realistic Situations

Question 5
Every week we are required to test

chemical discharges that are produced

when we make a particular product. The
tests always come out the same, so
sometimes when work is very busy we skip
the tests and do them a day or two later if
we can. Then, when we do the missing
tests, we just back date the results. Since
this helps manage our work-flow, is this
really wrong?

Some Realistic Situations

Answer 5
Definitely wrong.

Would you want to live

next to a plant that followed this behavior?
Probably not. Back-dating quality-control
measurements is unacceptable in any
situation and few things always stay the
same. Measurements are recorded to
ensure safe, legal operation of your
business. No answer at all is better than a
back-dated entry. Dont do this.

Some Realistic Situations

Question 6

The company just seconded me to be the

controller of a new production JV company. I
see competitors in the same marketplace
transferring crude at less than market price to a
subsidiary of one of the joint ventures for resale
at market price to a third party. That can have
the effect of reducing taxes for the joint venture
and increasing profits for one joint venture.
Should I suggest that the JV consider a similar
deal with one of my companys subsidiaries?

Some Realistic Situations

Answer 6
You have a responsibility to do what is

best for your company. Is this a legal

loophole and/or acceptable practice in the
jurisdiction? Will it facilitate an unfair
advantage for your company or just get
them on equal footing with the
competition?

Some Realistic Situations

Question 7

A former Company A employee who worked on

my team recently contacted me to request that I
provide copies of some materials we worked on
during his employment. In the course of this
conversation, I learned that this former
employee has copies of several binders and
CDs with Company A materials and data we
used in a project. I told this employee that I
would get back to him/her. What should I do
now?

Some Realistic Situations

Answer 7

If you told someone you will contact them, then

you should follow your commitment. As far as
the materials are concerned, you should ask if
they are proprietary materials that belong to
company A or intellectual property resulting from
your work together. You should also be familiar
with company As policy on intellectual property
as to what is & is not transferable and pass
along this information as appropriate to the
former employee. If you are still in doubt,
disclose your activities to your superior(s) and
seek the counsel of peers & other co-workers.

Some Realistic Situations

Question 8
I have a large grass-mower at home which

Im lending to a friend. Is it OK if I borrow

a Company A truck at the weekend to take
it to my friends house and then use it
again in two weeks to bring it back?

Some Realistic Situations

Answer 8

Since this is a work truck, you should follow

company As policies on the personal use of
company vehicles. There are many liability
issues to consider. You certainly should not be
using the truck to generate additional income
outside of work. However, if it is a simple, onetime non-commercial request then you should
fully disclose you request and ask for permission
from the proper authority at company A.

Some Realistic Situations

Question 9
I have just joined Company A as a new

employee. My prior employer is one of

Company As largest competitors. Can I
share some important confidential
marketing information that I developed
while working for this competitor?

Some Realistic Situations

Answer 9
You must follow your conscience as

what
is acceptable knowledge transfer. Your
intellectual property is yours to keep and
may be transferred. However, proprietary
information that you know is confidential
should not be shared with out permission.
You also have potential legal implications if
confidential information is shared,
especially if you signed a confidentiality
clause with your former employer.

Some Realistic Situations

Question 10
I have an idea to reduce subscription

costs for trade publications. The office

would get just one subscription to each
journal or newsletter, which would then be
circulated to everyone with instructions to
copy any articles they want. Is this a good
cost-cutting measure?

Some Realistic Situations

Answer 10
Check each publication for their particular

policy.
SPEs policy is up to 5 copies of any
article for personal use.

Some Realistic Situations

Question 11
We have someone on our team who is

hearing impaired. He is a great worker

and can speak but sounds very differently
than everyone else. Some people make
fun of him behind his back. I find it
embarrassing and bad for teamwork.
What should I do?

Some Realistic Situations

Answer 11

It is difficult, if not impossible, to control the behavior of

co-workers at all times. Also, offensive behavior is
relative and takes on many different meanings,
especially in a multi-cultural work environment.
However, if you find this mockery in bad taste and
counter-productive to work, you should talk to the
offending individual in private and tell them your feelings.
If the problem persists, you should comply with your
companys code of conduct and report the offending
behavior to a supervisor. Also, at some point, you should
inform the hearing impaired individual and seek his
assistance in ceasing the offensive behavior.

Some Realistic Situations

Question 12

I was working late last night at the office. When

I went to use the photocopier I found a small
stack of personnel records in the sorter. I
noticed that the copies contained payroll
information for our department. There was a lot
of personal information on these forms. I didnt
want to get anybody in trouble, but I also didnt
think it was right that this kind of information was
left for all to see. What should I do?

Some Realistic Situations

Answer 12
Unfortunately this

is a fairly common
occurrence and there is great potential for
identity theft and inappropriate
communication of personal information.
Put the personnel records in a safe place
and immediately notify the responsible
authority for this material. Disclose at the
start of the next day of business and dont
read anymore of the confidential
information while you are working late.

Some Realistic Situations

Question 13
You are offered tickets from

a vendor to a
local sporting event. Should you accept?

Some Realistic Examples

Answer 13

Accepting sporting tickets is a typical ethical dilemma that does not carry
a one-size-fits-all answer. However, there are some guidelines that can
be relevant to most situations:
First, what are your companys rules? Is this stated in your code of
conduct? Most companies forbid extravagant gifts of any kind. It is also
customary to avoid any extra contact with vendors during a contract
tender period. Is the vendor giving you tickets from a face value
purchase or are these a special, high-end purchase to a coveted event
like the Super Bowl, World Cup, etc.?
Probably the main ethical question to ask is whether accepting the tickets
is intended to be a simple gesture of appreciation or an attempt to impact
your judgment for a purchase.
As a final judgment, you must be able to live with yourself on the right
course of action. If you have a simple gesture of appreciation that will not
change your relationship with the vendor for better or worse, then you
probably should go and have fun. If accepting the tickets will impact your
fair judgment, then you have an ethical dilemma and probably should not
accept the tickets.

Sample Ethics Questions:

Question 14
A personal friend is a candidate for a job

with your company and you will potentially

be involved with the hiring decision. What
should you do?

Some Realistic Situations

Answer 14
You should not let your friendship affect a hiring
decision with your company if it gives them an unfair
advantage. However, if your friend is also a
potential valuable resource to your company, it is
equally unfair to penalize your friend in a hiring
competition.
It is always best to disclose your friendship to
everyone in the hiring process and to volunteer to
be excluded from sensitive hiring conversations. It
is acceptable to share your friends qualifications
and offer other outside references to assist in a fair
hiring decision.
Consider recruitment incentive.

Some Realistic Situations

Question 15
You work for an operating company and an

old friend from college is now a senior

manager with a service company. You are
working in a very busy area and there is
robust competition for your well services,
including many competitive bids. What
should you do?

Some Realistic Situations

Answer 15

It is not ethical to give your friend an unfair

advantage over his competitors.
It is best to disclose your friendship to your
supervisors. You should also have an agreement
with your friend to not discuss sensitive issues and
avoid private meetings during contract tenders.
Common sense goes a long way on this judgment.
Also, if it is a good friend, you should have better
things to discuss in private than work.
Follow your companys guidelines for bidding
procedures. Consider recusing yourself from the
process.

Some Realistic Situations

Question 16

You work for an operating company that is operating

a joint venture with a national oil company. Your
company has expats to work with local staff to
perform the daily operations and field development.
The national oil company is the only operator in the
country and there are no government safety or
conservation regulations. Operating standards are
well below your companys published internal
standards for safety and environmental issues.
What do you do?

Some Realistic Situations

Answer 16

This is a difficult issue where one must balance business

issues versus acceptable tolerance of relaxed safety and
environmental standards. No laws are being broken and
the national oil company obviously holds itself to a
different standard from the international company.
In this situation it is most often best to have a realistic
view of your companys influence on the operator.
Do your best to achieve conformance with your preferred
standard.
You should ensure that there is full disclosure to your
senior management of the operating issues. It is also
good to have informal discussions with fellow expats on
what will not be tolerated under any circumstances.

Some Realistic Situations

Question 17

You provide engineering services to clients in

the fields of reservoir engineering and reserves
analysis and reporting and are paid for your time
and reasonable expenses. Your client wants to
be provided a signed report showing that their
fields contain a certain level of reserves. You
receive data necessary to make an evaluation
along with the clients own reserves estimate
which is really the target they wish to see.
Should you take on this consulting project?

Some Realistic Situations

Answer 17
Discuss with the client that your estimates

may or may not match their expectations.

Explain your role or job as an independent
evaluator. That role is not to provide the
expected answer.
Maintain your role as an objective third
party.
Your answer must be auditable.

Some Realistic Situations

Answer 17 (cont)

You consider your preliminary reserves report to

be objective. It provides an estimate less than
the client desires. The client tries to arm twist
you and implies that the invoice for your services
might not be paid.
Discuss, on a technical level, the data set, field
operations, and assumptions with the client.
If you cannot agree with the client, agree that you
have reached an impasse, but payment should
be made for the services provided to that point.

Some Realistic Situations

Question 18

You consult as a petroleum engineer in the U.S.

One recently completed client project concerns
the evaluation of an oil field. Client A owned a
large working interest. You spent considerable
time analyzing the logs, well files, reservoir
maps, volumetrics, drilling potential, etc. Later,
client B calls you for an evaluation of its assets,
including the oil field evaluated for client A.
Client B lacks engineering and geological data
other than public data sources.

Some Realistic Situations

Answer 18

First, is it a conflict of interest and is it ethical to

take on the assignment for client B since you
earlier worked on the same field with client A?
Secondly, can you use the data you obtained
from client A in making an evaluation for client
B?
Ask client A if it is OK to use the information.
If not, use public data sets and prior learning
points.

Some Realistic Situations

Question 19

Your parent-based position is staff reservoir engineer at

Company X. In the past year you have come into the offshore
West Africa asset group. Your office handles most subsurface
work, but the overseas office handles hardware issues
including facilities/platform engineering, design, and project
planning. In your work you determine technical recoverable
oil reserves of 150 million barrels. This fact is exciting to your
management and they want the oil booked this year. While it
seems reasonable for you to make the reserves booking, you
know that the overseas office does the project planning and
economics, and you have not examined project economics,
nor ascertained whether company financial commitments to
develop have yet been made. Your manager says all is okay
in that regard and go ahead and do it.

Some Realistic Situations

Question 19 (cont)

Can you book these reserves? Who or what

level of your company has the responsibility for
validating reserves and the economics of
reserves? Can the ethics ball be bounced from
player to player in a corporation?
Follow appropriate corporate, governmental, and
professional guidelines.
Assure yourself and provide documentation of a
viable development plan.

Some Realistic Situations

Answer 19
Follow appropriate corporate,

governmental, and professional

guidelines.
Assure yourself and provide
documentation of a viable development
plan.

Some Realistic Situations

Question 20

You have been hired in mid-year as a division level manager of

E&P assets in a major oil company. Of course the job is new
for you; also, your staff is fairly thin in experience but at least
there is some continuity in knowledge of the gas and oil fields.
Your compensation package is salary plus bonus. Bonus is
tied to results: exceeding production targets, reserves
growth, and HS&E. The year has been good so far, but at the
December meeting with your staff, covering reserves and
production targets, you realize that there are problems. For
one thing, the maps on which some major reserves have been
booked are wildly optimistic. In fact, they show gas below
lowest known gas. Also, production goals are based upon
these interpretations. You would hate to have a lost time
accident when your boss hurts you for blowing the reserves
target and cutting the production goal for next year.

Some Realistic Situations

Question 20 (cont)
Should you mention the mapping problem

to your management? Should you request

new reserves maps? To what degree
should your short time on the job be a
factor? How much do you need to know
before something becomes an ethical
issue? When is it ethical to plead
ignorance?

Some Realistic Situations

Answer 20

Rely on technical analyses of the problem and

when convinced there is a discrepancy, report
appropriately.
Follow appropriate corporate, governmental, and
professional guidelines.
Assure yourself and provide documentation of a
viable development plan.
When reporting, consider a good pair of running
shoes and a clear path to the exit.

Thank you for participating in this

presentation on ethics.

For additional information on

professionalism and best practices,
contact SPE Professional development at
development@spe.org