More trouble for BP as investigators examine possible price manipulation

The two executives are "important witnesses for the jury to hear from regarding budget cutbacks that threatened the safety of BP operations, the poor state of BP refineries before the explosion and the ongoing investigation at the highest levels of BP into senior BP management's role in the explosion," said one of the lawyers, Brent Coon.

The Toronto Star
August 30, 2006

More trouble for BP as investigators examine possible price manipulation
Company in 'a minefield right now' Alaska spill, Texas explosion probed
Stephen Voss, Mathew Carr

BP PLC, the world's third-largest oil company, is being investigated for possible manipulation of crude oil and gasoline prices, raising concern that the company has failed to manage its U.S. operations.

Trading of crude by BP is being reviewed by the U.S. Commodity Futures Trading U.S. Commodity Futures Trading Commission Commission in Washington, D.C., and gasoline by the U.S. justice department, BP spokesman Robert Wine said. London- based BP is "co-operating fully," he said. The CFTC alleged in June that BP attempted to corner the propane market.

BP and chief executive officer John Browne face grand jury probes into the spill of 6,400 barrels of oil in Alaska in March and a refinery explosion in Texas City, Tex., that killed 15 people in 2005. BP shares have fallen 17 per cent since April 24, compared with a 7.6 per cent jump at Exxon Mobil Corp.

"The company is in a minefield right now. Every time they turn around, there is an explosion," said Fadel Gheit, senior vice- president of oil and gas research at Oppenheimer & Co. in New York. "There is no win here. It's either a loss or a draw. They are trying to minimize the loss."

For six years BP has advertised itself as an environmentally friendly company, changing its corporate logo to a sunburst from the BP shield and said its initials stand for "Beyond Petroleum."

The Wall Street Journal reported yesterday that the trading commission has sent subpoenas to BP and other energy traders in its study of crude oil over-the-counter prices in 2003 and 2004. Federal authorities are also assessing whether BP used information about its pipelines and storage tanks at Cushing, Okla., the delivery point for U.S. crude futures contracts, to influence benchmark prices, the paper said.

The gasoline study, which has been going on for more than a year, includes a criminal probe by the justice department and is focused on one day's trading on the New York Mercantile Exchange in 2002, the newspaper said, citing unidentified lawyers and traders.

"The worst-case scenario is they will end up having a penalty of tens of millions of dollars," said Oppenheimer's Gheit. "Hopefully, it will be contained."

BP plans to appeal a decision by a Texas court Monday ordering Browne and the company's head of refining and marketing, John Manzoni, to testify before a lawyer representing workers injured in the Texas City blast and relatives of workers who were killed.

"The plan is to appeal on the grounds that neither has unique knowledge of the incident," said Toby Odone, a London-based BP spokesman.

The two executives are "important witnesses for the jury to hear from regarding budget cutbacks that threatened the safety of BP operations, the poor state of BP refineries before the explosion and the ongoing investigation at the highest levels of BP into senior BP management's role in the explosion," said one of the lawyers, Brent Coon.

BP is one of the world's largest energy traders. Its profit from trading oil and natural gas rose 56 per cent in 2005 to $2.9 billion (U.S.) as energy prices soared. It produces the equivalent of about 4 million barrels of oil and gas a day.

Credit: Bloomberg News


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