Financial News

  • 6 August 2013, 10:28

BP Faces US Fine For 'Market Manipulation'

BP has been told it faces a fine of almost 19m for alleged manipulation of the natural gas market.

The US federal energy regulator confirmed it had ordered the company to respond to the allegations within 30 days.

The case, brought by the Federal Energy Regulatory Commission's (FERC) Office of Enforcement, claims BP manipulated the natural gas market at the Houston Ship Channel from mid-September 2008 through November of that year.

FERC, which first raised the allegations in 2011, said the order marked the next stage in proceedings and indicated that it believed there was a case to answer.

The regulator said its Office of Enforcement alleged BP's Texas-based Southeast Gas Trading desk bought and sold physical gas at the Houston Ship Channel in a way designed to increase the value of BP's financial paper position.

The total proposed fines include a penalty of 18.2m and 520,000 in profits, plus interest, from the alleged trading scheme.

The move comes at a time when BP is fighting to improve its image in the US following the Gulf of Mexico oil disaster.

It has consistently denied any wrong-doing relating to the gas market case.

In a statement, the company's vice president and head of US communications, Geoff Morrell said the allegations were "without merit".

He added: "BP is disappointed that the FERC has brought this action and we will vigorously defend against these allegations.

"The FERC bases its allegations on a recorded two-minute phone conversation between a BP trainee and BP natural gas trader that the regulator has taken completely out of context.

"The recording does not support any allegation of wrongdoing. In fact, the trainee involved in the conversation states that his characterisation was incorrect and the trader never agrees with nor condones the trainee's statements.

"The trader also reacts strongly to the trainee's comments and interrupts him because the trainee's comments - as the trainee admits on the call - are incorrect and inappropriate.

"The trader also promptly reported the conversation and BP's compliance personnel acted appropriately in examining the trading at issue."

FERC has been pursuing banks and other energy companies for entering loss-making trades in one market in a bid to make gains in another.

In July it settled a power market manipulation claim against JPMorgan Chase for $410m (267m) and is seeking $470m (306m) from Barclays over allegations of similar activities.

Barclays has said it will fight the proposed fine.