Wednesday, October 8, 2008

Two of Europe's biggest energy groups, were yesterday implicated in an alleged Libyan bribery scheme

The Financial Times

Repsol and Total reply to Libya case

By Carola Hoyos in London

Published: October 8 2008 03:00 | Last updated: October 8 2008 03:00

Repsol YPF and Total, two of Europe's biggest energy groups, were yesterday implicated in an alleged Libyan bribery scheme after a report for Norway's Hydro found mistakes in paying consultants to secure oil fields in the North African country.

Two senior executives at StatoilHydro - formed last year from the merger of the two groups - also resigned yesterday after an independent report found Hydro had breached company rules. The company handed the case to Norwegian police after publishing the report, which concluded Hydro had paid millions of dollars in "consultancy fees" in the early 2000s.

Total denied any wrong-doing and a Repsol official said the company's current management had attempted to correct the situation and to recoup the money.

In December 2000, at the Repsol-operated Murzuq development, Hydro paid $300,000 after it received an invoice from the operator. In hindsight the payment was viewed as "problematic" by some people, according to Hydro documents, states the report by law firm Sherman and Sterling.

When in late 2001 Repsol wanted to hire a second consultant and to agree a success fee of $4.5m-$10.5m, Hydro and one other partner raised concerns this could contravene the OECD's convention against bribery of foreign officials, according to the report. The report stated that it sought to set out the facts, rather than to make legal accusations, but did not include testimony from the operators.

In 2002, Hydro refused to pay $900,000 of a $4.5m fee for "exceptional overhead costs," which it perceived as "a camouflage for payments" to a consultant and threatened to bring the matter before a steering committee. But it backed down when the "operator agreed not to seek Hydro's share of the payment," the report stated.

Repsol officials said the current management became aware of the payments in 2005 and sought to recoup them in an arbitration hearing in the UK. "But the justices, even on appeal, said the contracts were valid and Repsol was not refunded and in fact was forced to pay a further sum being sought by the consultant," a senior Repsol executive said.

Spain ratified the OECD's convention against bribery of foreign officials on January 4 2000 while France did so on July 31 2000.

In the Mabruk development, operated by Total, Hydro had similar reservations, but nonetheless paid $1.9375m to the operator in October 2000. "The evidence suggests that these payments may have been understood, at the time or later, as having been tied to the operator's consultant," the report stated.

Paul Floren, a spokesman for Total, said: "The report does not establish any wrongdoing by Total. The invoices sent out by the joint venture to Hydro were normal expenses for the Mabruk field and the report does not establish anything to the contrary."

But Hydro called that payment "another misjudgement."

Terje Vareberg, chairman of Hydro's board of directors, said: "The investigation has revealed that mistakes were made in Libya in 2000-2001 that represent a breach of Hydro's regulations. This is regrettable, and we need to learn from it. Any mistake in this area is unacceptable . . . "

Hydro is said to be concerned about a third relationship with a consultant, retained in 1999 by Saga, the company Hydro took over in 1999 and that became part of StatoilHydro, when Hydro and Statoil merged.

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