BP has once again found itself under the scrutiny of federal regulators, this time for alleged manipulation of natural gas prices.
The UK oil giant said in a filing that the US Commodity Futures Trading Commission and the US Federal Energy Regulatory Commission have examined trades BP conducted in the next-day natural gas market at the Houston Ship Channel in October and November of 2008. Both agencies in November told BP they concluded the company broke the law by attempting to manipulate the market, according to the filing made to the US Securities and Exchange Commission.
This opens a new episode in a long saga of legal troubles that have hobbled BP since the fatal explosion at its Texas City refinery in 2005. The disclosure of this latest investigation comes as BP tries to grapple with the fallout of last year’s massive oil spill in the US Gulf of Mexico.
It also raises questions about the role of a government-appointed trading-compliance monitor that was put in place for three years back in October 2007, when BP agreed to pay $US303 million in criminal and civil penalties and restitution for driving up the price of propane in 2004. That remains the largest manipulation settlement in the history of the CFTC.
CFTC staff told the company it intended to recommend charges against the company, according to the filing. BP said it provided both agencies with a detailed response to their claims, arguing that “it did not engage in any inappropriate or unlawful activity.” FERC, which regulates the transportation of natural gas, is still deciding its course of action.
BP spokesman Scott Dean said the company “conducts its trading and transportation activities in compliance with the law and regulations,” and that it has “fully cooperated with the FERC and the CFTC investigations.”
Both federal agencies declined to comment on the content of the filing.
Trading in natural-gas futures is volatile. Futures on the New York Mercantile Exchange declined by 12 per cent during the period of time in question, which coincided with financial crisis as well as a seasonal dip in demand.
Gas for next-day delivery, or spot gas, at the Houston Ship Channel typically is priced about 40 cents less than the price for gas at the Henry Hub delivery point in Louisiana, according to data from FERC’s website. In 2008, gas at the ship channel averaged $US8.50 a million British thermal units, while Henry Hub gas averaged $US8.85/MMBtu.
Spot gas at the ship channel traded in a range of $US4.28 to $US4.37/MMBtu on Tuesday, according to IntercontinentalExchange.
At the time BP settled the propane manipulation charges with the CFTC, the creation of a compliance monitor just for BP was expected to introduce a new, more conservative culture to the company’s trading desk. BP has been the target of other commodity-trading probes.
However, last year a federal judge in Texas dismissed indictments against four ex-BP traders involved in the propane-trading case.
The rupture of a key oil pipeline in Alaska in 2006 also resulted in an onslaught of litigation with the state and the federal government. The Deepwater Horizon spill could end up costing BP dozens of billions of dollars, and has already forced it to shed assets. On Tuesday, BP said it seeks to sell its Texas City, Texas, and Carson, Calif., refineries.
BP on Tuesday posted a fourth-quarter earnings of $US4.36bn, a 0.5per cent decline as it produced less oil and gas than in the same quarter of 2009.