December 4, 2020 Vitol pays $164 mln to resolve U.S. allegations of according to the DOJ statement. oil bribes in Latin America Prosecutors said the bribes went to employees at Mexico's Vitol Group's U.S. subsidiary agreed to pay $164 state-run Pemex and Ecuadorian state oil company million to resolve probes by the U.S. government that Petroecuador. the energy trader paid bribes in Brazil and other Petroecuador and Pemex did not respond to requests for countries to boost its oil trading business, the U.S. comment. Department of Justice said on Thursday. Brazilian prosecutors announced in late 2018 that they Under a three-year deferred prosecution agreement, were investigating Petrobras' oil deals with trading houses, the Swiss trading firm admitted guilt and agreed to including the world's biggest oil traders - Vitol, Trafigura improve internal reporting and compliance functions. and Glencore. Vitol, run out of London, is the world's largest In early 2019, the DOJ opened its own probe into the three independent oil trader, trading some 8 million barrels company's dealings in Brazil. The FBI investigated two key of oil a day. Vitol executives who were overseeing the region during "Vitol paid bribes to government officials in Brazil, those years, including the head of Vitol's U.S. arm, Michael Ecuador and Mexico to win lucrative business "Mike" Loya, who retired earlier this year. contracts and obtain competitive advantages to which Loya did not immediately respond to a message sent to his they were not fairly entitled," Acting U.S. Attorney LinkedIn account. Seth DuCharme of the Eastern District of New York Trafigura said no charges had been brought against any said in a statement. Trafigura company or its current management. Glencore The energy trader will pay the Department of Justice declined to comment. (DOJ) a criminal penalty of $135 million to resolve the Brazilian prosecutors charged two former Trafigura probes. Brazilian authorities will receive $45 million employees, including a former board member, in late 2018 from that amount. over allegations of paying bribes to Petrobras employees. Vitol will also pay back the Commodity Futures Trading Commission (CFTC) over $12.7 million in ill- gotten gains, plus $16 million in fines, according to the COLUMN-The OPEC+ deal looks sensible in theory, DOJ statement. challenging in reality: Russell "Vitol is committed to upholding the law and does not The agreement by the OPEC+ group to gradually increase tolerate corruption or illegal business practices. As production is one of those deals that seems sensible and recognised by the authorities, Vitol has cooperated has reasonable aims, but will actually be difficult to pull off extensively throughout this process," Vitol CEO in reality. Russell Hardy said in a statement. The producer group, made up of the Organization of the Brazilian police have for years been investigating Petroleum Exporting Countries and others including several major companies for the alleged use of bribes Russia, reached a deal to ease their current 7.7 million to win contracts with state-controlled oil company barrel per day (bpd) of output cuts by 500,000 bpd in Petroleo Brasileiro SA (Petrobras), as part of the wide January. -ranging 'Car Wash' probe. The grouping will then review on a monthly basis whether In October, police expanded the investigation at to continue the gradual increase in production, or whether Petrobras based in part on secret recordings made by to pause, presumably determinant on prevailing market a former executive of Vitol, according to court conditions. documents. In effect, what OPEC+ is trying to do is achieve a trifecta Vitol and its co-conspirators paid over $8 million to at of increasing their volumes, keeping prices at least at least four Petrobras officials between 2005 and 2014, current levels, and finally not surrendering market share to the DOJ said. In an effort to hide the schemes, the producers outside the group, such as the United States company used "sham" consulting agreements, shell and Brazil. companies, and fake invoices with its co-conspirators, Initial market reaction to the deal was positive from a price who in turn communicated with code names like perspective, with global benchmark Brent crude futures 'Batman', 'Dolphin' and 'Tiger.' rising as much as 1.4% on Thursday to $48.94 a barrel, Petrobras said in a statement that it had assisted before ending at $48.77, the highest close since early prosecutors with dozens of investigations into alleged March. corruption involving employees. In effect, the market is saying it has some confidence in the ability of OPEC+ to return supplies to the market at more or less the same pace as demand is likely to grow as ECUADOR AND MEXICO the world starts to recover from the novel coronavirus Vitol also admitted to bribing or agreeing to pay over pandemic. $2 million to officials in Ecuador and Mexico in other The problem with this view is that it assumes a whole to secure and retain business there for oil products, range of factors are somehow within OPEC+'s control, December 4, 2020 (continued) which they are not. groups and Democrats have cast it as a giveaway to Big With the coronavirus still prevalent in much of Europe Oil that would harm the Arctic's unique ecosystem and and in the United States, the hopes for a rebound in native people. demand lie pretty much with Asia, which as a region has The sale notice will be published on Monday, setting up a done a far better job of containing the pandemic. sale to be held on Jan. 6 via video livestream, the U.S. The problem for crude oil bulls is that the reason Asia Bureau of Land Management said in a statement. has done better is that they have strictly curtailed travel The announcement comes a little more than two weeks between countries and often domestically as well, after Trump's Republican administration issued a request encouraged work from home and social distancing. to energy companies to identify what specific areas in the None of these tactics point to higher crude oil demand, refuge should be offered for sale. The companies have and with a vaccine still some way off for the wider public, 30 days to respond, and a sale notice was not expected it may be optimistic to think demand is going to start to be issued until the end of that period. recovering strongly from January onwards. "The Trump Administration is hell-bent on selling off the Arctic Refuge on its way out the door, rules be damned," Matt Lee-Ashley, a senior fellow at the liberal think tank U.S. SHALE, NORWAY Center for American Progress, said in an emailed Another factor largely beyond OPEC+'s control is how statement. will U.S. shale producers respond to the signal of higher Holding a lease sale is just one of many steps in energy prices. development, and oil and gas companies would have Past experience suggests they will start to pump more several big obstacles to overcome before any wells could crude, gradually at first but accelerating over time if the be drilled. price gains seem to be holding. It typically takes several weeks for leases to be issued Norway, a producer outside of OPEC+, has also said its once a sale is held, a formality that could fall to the next voluntary output cuts will not be rolled over when they administration. expire at the end of December, potentially adding In addition, environmentalists, native groups and 300,000 bpd to the market. Democratic-led states have filed four lawsuits aimed at What this likely means is that more than OPEC+'s stopping drilling in ANWR. They are currently weighing 500,000 bpd may be added to the global markets in their legal options now that a sale appears likely, two of January, at a time when it's still too early for the multiple the green groups said. vaccines to have had any impact on boosting travel, or Finally, several major U.S. banks have said they will not on opening borders. finance oil and gas projects in the Arctic region. There is also the question of compliance by OPEC+ Alaskan oil production has dwindled in the last three members, although so far this has been reasonable, with decades, and it is unclear whether the sale will attract 102% compliance in November among OPEC members much interest from the industry. ANWR has been tested subject to quotas. only once for the potential to extract fossil fuels. But the temptation of higher prices may be enough to Drilling had been banned in the refuge for decades before loosen adherence, especially among members who were Republican-led tax legislation signed in 2017 removed opposed to extending the current cuts in any form. that ban. Lawmakers in Alaska have long pushed to open Overall, while the OPEC+ deal appears like a reasonable up the area to oil and gas exploration. compromise, several factors outside the group's control BLM's Alaska state director, Chad Padgett, said in a will also have to fall into place for it to be as bullish as the statement that oil and gas from ANWR's coastal plain "is initial market reaction has assumed. an important resource for meeting our Nation's long-term energy demands and will help create jobs and economic Trump admin to hold Arctic refuge oil drilling auction opportunities." before Biden takes office Bureau of Land Management officials were not The Trump administration on Thursday said it would immediately available to comment on the timeline. A issue a sale notice for oil leases in the Arctic National White House spokesman would not comment.