US regulator seeks $29-mn fine on BP for manipulating natural gas market

The US energy regulator has asked BP to respond to allegations of manipulating the natural gas market in Texas and threatened the British oil giant with a fine of nearly $29 million (£19 million).

The move from the US Federal Energy Regulatory Commission (FERC) comes after it recently slapped fines on Deutsche Bank, Barclays Plc and JPMorgan Chase for allegedly manipulating the California power markets.

The FERC bases its allegations on a recorded two-minute phone conversation between a BP trainee and a BP natural gas trader, in which the trainee says that the company bought and sold gas at a possible loss in the physical market in order to increase the value of its derivatives position.

The FERC had brought this to the notice of the London-based company in 2011, alleging that from approximately mid-September 2008 through November 2008 BP fraudulently traded physical natural gas in the Houston Ship Channel and Katy markets and traded points to increase the value of its financial swing spread positions.

''BP accomplished its fraud by using transportation capacity between the two markets uneconomically. In doing so, BP contributed to lower HSC Gas Daily daily indices to increase the value of its financial positions by making early and repeated sales; using high market concentrations; and by trading relationally to its financial spread.

Apart from the $29 million penalty, FERC is also hoping to claim $800,000 in BP's profits from the scheme.

BP denied the charges and said in a statement that it ''is disappointed that the FERC has brought this action and we will vigorously defend against these allegations.''

It said that the recording does not support any allegation of wrongdoing. In fact, the trainee said in the conversation that his characterisation was incorrect and the trader never agrees with nor condones the trainee's statements.

The company said that the trader had promptly reported the conversation and BP's compliance personnel examined the trading at issue but found no wrongdoing.