MarketWatch: U.S. probes BP over crude, gas dealings (Whether markets were manipulated at heart of latest inquiries)

Aug 29, 2006: LONDON (MarketWatch) — The U.S. government has begun criminal and civil investigations into whether BP Plc manipulated U.S. crude-oil and unleaded-gasoline markets, as the British petroleum giant’s chief executive is being forced to testify under oath about safety problems.

The world’s second-largest publicly traded oil company, BP has acknowledged the investigations and said it’s cooperating with U.S. authorities, The Wall Street Journal reported Tuesday. See Wall Street Journal story below.

The Wall Street Journal: BP Woes Deepen With New Probe

A London-based BP spokeswoman wouldn’t elaborate on the report but said she didn’t see any mistakes in the article.

“We always assist regulators in trying to find out the facts and figures on how our business works,” she said.

Disclosure of the investigations comes as BP has been summoned before the House Energy and Commerce Committee to explain the recently discovered pipeline leak at its Prudhoe Bay, Alaska, operation that has indefinitely taken some 200,000 barrels a day of crude output off the market.

It also comes while BP is trying to recover from negative publicity stemming from a March 23, 2005, explosion and fire at its giant Texas City, Tex., refinery that killed 15 workers, injured 180 more and resulted in a record U.S. fine of $21.3 million for safety violations.

The Financial Times separately reported Tuesday that BP CEO John Browne will have to testify, because he had “unique and superior knowledge.” BP told the newspaper it will appeal the decision made by a Texas state judge.

And BP already faces a civil complaint filed by federal commodities regulators for allegedly manipulating much of the U.S. market for propane.

BP’s shares have slipped 2% this year, compared to a nearly 6% rise for rival oil giant Royal Dutch Shell. BP’s London-listed shares declined 0.3% in midday trading.

Alleged manipulation

Now, the Journal reports, the Commodity Futures Trading Commission has sent subpoenas to BP and energy traders in the crude-oil probe, which is focused on possible manipulation of the global over-the-counter market in 2003 and 2004.

The over-the-counter market includes trades conducted over the phone or electronically in products not listed on exchanges, or in marketplaces that regulators can’t see.
The separate gasoline inquiry, which has been under way more than a year and includes a criminal probe by the Justice Department, is examining a single day’s trading on the New York Mercantile Exchange in 2002, the Journal said, citing lawyers and traders close to the case.

And people at other firms said many trading firms had received CFTC demands for information, suggesting that the scope of the investigation goes beyond BP, the Journal reported.

CFTC and Justice Department spokesmen declined to comment to the newspaper.

In the broader civil investigation into crude-oil trading, investigators are examining whether BP used information about its own pipelines and storage tanks at a key oil-delivery point in Cushing, Okla., to influence crude-oil price benchmarks that are set each day and influence billions of dollars of transactions, The Journal said.

That investigation isn’t related to the propane case, in which civil claims by the CFTC are pending against BP in federal court in Chicago, as well as a criminal charge against a former BP trader in U.S. District Court in Washington; numerous civil lawsuits seeking damages are also pending, the Journal said.

BP has denied wrongdoing in the propane case.

An earlier CFTC investigation into BP’s crude-oil trading was closed without charges, the Journal reported. 

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