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Shell targeted with BP, Statoil in European oil-price probe
By Brian Swint and Lananh Nguyen
Bloomberg News
Tuesday, May 14, 2013
http://www.bloomberg.com/news/2013-05-14/statoil-raided-by-competition-a...
LONDON -- European antitrust regulators began a probe of potential manipulation of oil prices, expanding into energy markets after banks were investigated for fixing interbank lending rates.
Royal Dutch Shell, BP, and Statoil said they're being investigated after the European Commission conducted raids in three countries. Platts, which publishes pricing benchmarks used by the oil industry, said it was also visited by regulators.
The oil-price probe follows findings by U.S. and U.K. regulators that banks manipulated the London interbank offered rate, or Libor, that may have helped them generate profits from derivatives trades. Royal Bank of Scotland Group Plc, UBS AG, and Barclays Plc have been fined around $2.5 billion and other firms remain under investigation.
"It is certainly the case that Libor drew attention to financial benchmarks in general and the question of how these agencies report prices," Timothy McIver, an antitrust lawyer at the London office of Debevoise & Plimpton LLP, said in an e-mailed statement. "This is obviously the latest in a series of such investigations."
Statoil said the suspected violations relate to Platts prices.
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"The commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products," the executive arm of the EU said in the statement.
Platts said in March it would introduce a quality premium for Ekofisk and Oseberg crudes, two of the four grades that make up the Dated Brent marker used to price more than half the world's oil. That came after Shell made adjustments to its trading contract for three blends including Brent.
Platts, along with two other reporting agencies, Argus Media Ltd. and ICIS, published a self-regulatory code in April 2012 in response to concerns from the International Organization of Security Commissions that their prices were at risk of manipulation.
Price assessments could be vulnerable to manipulation because traders participate voluntarily, meaning they may selectively submit only trades that benefit their positions, IOSCO said in an October report. Total Oil Trading SA, the arm of the French oil company called Total SA, said in a submission to the forum of global regulators that the published oil price is wrong "several times a year."
"The actual mechanism of price discovery is suspicious to EU regulators even though I believe it works," Andrey Kryuchenkov, an analyst at VTB Capital in London, said in an e-mailed response to questions. The probe "sets the precedent for similar investigations."
Inspections were also carried out on the commission's behalf by the EFTA Surveillance Authority in one European Economic Area member state, the Brussels-based commission said.
"The authorities suspect participation by several companies, including Statoil, in anti-competitive agreements and/or concerted practices," Statoil said in a statement. "In addition, the inspection relates to potential abuse of possible dominant position by another party."
The suspected violations are related to the Platts' Market-On-Close price assessment process, used to report prices in particular for crude oil, refined oil products and biofuels, and may have been ongoing since 2002, Statoil said. Platts said the Commission undertook a review at its premises in London today and that it's cooperating.
"It's a bit like the oil industry version of Libor," said Iain Reid, an analyst at Jefferies Group LLC in London. "But I'd be very surprised if it comes to anything. I can't imagine that Shell or Statoil would be trying to rig the market."
Oil companies have been the subject of the EU's antitrust watchdog before. In September 2006, it fined 14 companies 266.7 million euros ($346 million) for fixing the price of bitumen, a petroleum byproduct used to make asphalt, over eight years on the Dutch market. Shell, whose fine was increased for being a repeat offender, received the biggest penalty.
Shell, Europe's biggest oil company, said it's "currently assisting" the commission in an inquiry into trading activities and that the company is cooperating, without giving further details.
"BP is one of the companies that is subject to an investigation that was announced earlier today by the European Commission," BP spokesman Robert Wine said in an e-mail. "We are cooperating fully with the investigation and unable to comment further at this time."
Total SA declined to comment and Eni SpA couldn't immediately be reached.
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