(The following statement was released by the rating agency)
LONDON, May 15 (Fitch) Any fines imposed on major European oil companies as a
result of the European Commission's investigation into alleged price
manipulation would most likely be manageable, given the big cash reserves all
these producers hold, Fitch Ratings says. The potential longer-term impact from
reputational damage or closer regulatory oversight, if the probe uncovers
wrongdoing, is uncertain.
The European Commission's investigation is at an early stage and it is unknown
whether it will result in action against any of the companies, which reportedly
include Royal Dutch Shell, BP and Statoil. However, the investigation's focus on
potential collusion over price reporting draws parallels with the investigations
by European and US regulators into Libor rates.
The biggest settlement so far over Libor was CHF1.4bn that UBS agreed to pay US,
UK and Swiss regulators last year. Even if investigation does uncover
wrongdoing, it does not necessarily follow that fines for alleged oil price
manipulation would be of a similar size. But if they were, we would not expect
them to have an impact on credit ratings, as these producers typically have
between USD10bn and USD20bn of cash on their balance sheets. Significantly
bigger fines would still be manageable, as shown by BP's ability to cope with
the cost of the Macondo oil spill, but would be more likely to have an impact on
Other than fines, if an oil company is found to have distorted prices, it could
face longer-term risks from damage to its reputation. While these risks are less
easy to predict and would depend on the extent of any wrongdoing, scope does
exist for commercial damage, even for sectors with polarising positions in the
public mind. For example, the reputational damage to BP following the Macondo
disaster led to the company withdrawing, or being excluded, from bidding for
some business in the Gulf of Mexico. Similarly, Shell's revision of its reserves
in 2004 damaged its credibility and raised questions about internal controls and
management oversight among other factors, which led to a downgrade of the
Other potential impacts, such as increased regulatory oversight or the departure
of key senior management are unclear and we will monitor the progress of the
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