Norwegian state oil company Statoil risks getting hit with a huge fine, possibly as much as NOK 70 billion (USD 12 billion), if a raid on its headquarters Tuesday leads to cartel charges from European regulators. The raid itself, claimed one analyst, is “one of the worst things a company can experience.”
Inspectors from the European Free Trade Association’s Surveillance Authority (ESA) raided Statoil’s offices in Stavanger along with offices of Royal Dutch Shell of the Netherlands, BP of the UK and Platts in London in a coordinated action on Tuesday. They acted on suspicions that the oil companies have violated bans on cartels and manipulated prices for oil and oil products, possibly since 2002.
The raids mark the start of an investigation that likely will take at least a year, Oslo attorney Øyvind Andersen, an expert on EU- and competition law, told newspaper Aftenposten. Andersen said that if the inspectors, acting on behalf of the EU Commission, conclude there are grounds to proceed with the investigation, they will then notify the companies of a possible fine.
Such a fine can amount to as much as 10 percent of the company’s revenues in the prior accounting year. Statoil logged revenues of around NOK 700 billion in 2012, which is why several analysts in Norway were warning that any fine for Statoil alone could be as much as NOK 70 billion.
Statoil officials were clearly caught by surprise when the ESA inspectors, backed up by inspectors from Norway’s own competition authority Konkurransetilsynet, suddenly showed up at headquarters in Stavanger on the very day the company was due to conduct its annual shareholders meeting. Statoil chief executive Helge Lund was in the office when they arrived and met with the inspectors, but later had to leave to conduct the shareholder meeting that began later in the afternoon.
Lund and other top Statoil officials declined to join in the speculation as to what the suspected price manipulation may mean for Statoil but stressed they were cooperating fully with the inspectors. “We will make sure they get access to all the information they need in order to conduct their inspection, and we don’t know how much time this will take,” Statoil’s information director Jannik Lindbæk said. He had earlier said Statoil was eager to “clear up” anything company officials could for the inspectors.
In addition to the suspected price manipulation, the EU Commission stated in a press release that it also suspected the companies involved may have hindered other companies from taking part in the alleged price-setting. If such charges are eventually filed, they would be “viewed as serious economic crime,” Andersen said. It remained unclear what led to the EU Commission’s suspicions. Other similar cases have often resulted from complaints from competitors.
The raid itself, and seizure of documents, indicates just how serious the suspicions are, noted both Andersen and oil industry analyst Thina Saltvedt of Nordea. Saltvedt told newspaper Dagens Næringsliv (DN) that she feared effects on Statoil’s share price, customer flight and lawsuits against Statoil after the raid.
“This is one of the worst things a company can experience,” Saltvedt told DN. Since regulators generally don’t resort to such a raid unless suspicions of illegal activity are strong, the company’s reputation is put at risk. “The biggest challenge now is to clean up its name,” Saltvedt said.
Government distances itself
The Norwegian government still holds 67 percent of Statoil’s shares, on behalf of the Norwegian people, but the government’s oil minister, Ola Morten Moe, had little comment on the raid. “This is a case that involves Statoil and which will be handled by the company’s management,” Moe told newspaper Dagsavisen.
Analyst John Olaisen of ABG Sundal Collier in Oslo said he’s only worried about a possible fine. “We have seen before that fines can take 10 percent of the top line,” Olaisen told DN. “I have faith, though, that Statoil hasn’t done anything wrong. At least pretty good faith.”
If inspectors find no grounds to proceed, the case may be over in a year. If they do, and warn of a fine, the companies must then respond both in writing and orally. If fines are imposed, it’s common for the companies to appeal to the EU court, with the legal process lasting as long as three to five years.
Views and News from Norway/Nina Berglund
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