Monday, 5 August 2013

(05-08-2013) FERC seeks BP response to natural gas market manipulation [ Bus1nessN3wz ]

FERC seeks BP response to natural gas market manipulation Aug 5th 2013, 16:23

By Scott DiSavino

(Reuters) – U.S. federal energy regulators on Monday ordered BP Plc to respond to allegations of natural gas market manipulation, threatening the energy company with fines near $ 29 million (£18.9 million).

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

The commission said BP has 30 days to file a reply to its so-called ‘show cause’ order.

“These allegations are without merit and we stand by what we previously disclosed publicly in February 2011 – that BP natural gas traders did not engage in any market manipulation in late 2008,” BP spokesman Geoff Morrell said in a statement.

“BP is disappointed that the FERC has brought this action and we will vigorously defend against these allegations.”

FERC posted the original allegations in 2011. Monday’s order marks the next stage in proceedings and indicates that the regulator believes there is 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 fines include a penalty of $ 28 million and $ 800,000 in profits, plus interest, from the alleged trading scheme.

That fine pales in comparison to the $ 303 million BP paid the U.S. Commodities Futures Trading Commission in 2007 to settle allegations the company attempted to manipulate the propane market in 2003 and 2004.

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

Since the U.S. Congress bolstered FERC’s enforcement power in 2005 following the California energy crisis and the Enron scandal, the regulator has pursued several high profile market manipulation cases against power companies, banks and now oil companies.

FERC last month settled a power market manipulation case with JPMorgan Chase & Co for $ 410 million and is seeking $ 470 million from Barclays Plc over allegations of similar activities. Barclays has said it will fight the proposed fine.

Specifically, FERC alleged BP’s traders uneconomically used the company’s transportation capacity between two natural gas hubs in Texas – Katy and Houston Ship Channel.

In doing so, FERC said the BP traders “suppressed the Houston Ship Channel Gas Daily index with the goal of increasing the value of the company’s financial position at Houston Ship Channel from mid-September 2008 through November 2008.”

Gas Daily is a publication owned by McGraw Hill’s Platts energy information unit that produces natural gas price indexes.

FERC said BP has the option to pay the fine or contest the order. If BP chooses to contest the order or the proposed fine, the Commission said it will issue a further order that may require the company to pay a penalty.

(Reporting by Scott DiSavino; Editing by Gerald E. McCormick and Sofina Mirza-Reid)