Oil Sands Win Wall Street Favor After Years in Shale Shadow

WILL WALL ST SAVE KENNEY

Robert Tuttle and Michael Bellusci
Mon, December 14, 2020, 

  

Oil Sands Win Wall Street Favor After Years in Shale Shadow



(Bloomberg) -- After years in the shadow of the U.S. shale boom, the Canadian oil sands are emerging from 2020’s historic market crash with a slew of upbeat outlooks from Wall Street equity analysts.

Morgan Stanley and Goldman Sachs Group Inc. are the latest firms to point out the industry’s ability to generate healthy cash flow next year as a reason to buy stocks like Suncor Energy Inc., Canadian Natural Resources Ltd. and MEG Energy Corp. That follows similar reports from BofA Securities and BMO Capital Markets.

“With improved cost structures and increased propensity to be capital disciplined, Canadian producers are emerging from the downturn stronger, with greater ability to generate free cash flow,” Morgan Stanley analysts Benny Wong and Adam J Gray said in a note Friday.


Among tailwinds improving the prospects for the beleaguered heavy-crude producers of northern Alberta are declining competition from Mexico and the start of construction of three pipelines, following years of insufficient shipping capacity. Prime Minister Justin Trudeau’s decision last week to narrow the scope of Canada’s new Clean Fuel Standard, by including liquid fossil fuels but leaving out solid and gaseous fuels, is also seen as a positive for the sector.

Steady output from their mines means that oil sands producers are able to keep revenue coming for decades without too much investment, while the short life span of shale wells forces U.S. explorers to constantly burn cash just to keep up production.

The eight largest oil-sands producers by market value posted a combined free cash flow of $1.4 billion for the third quarter, compared with $163.7 million from the top eight U.S. exploration and production companies, according to data compiled by Bloomberg.

Exports of Mexico’s flagship Maya heavy crude grade are forecast to decline by 70% in the next three years, helping narrow Western Canadian Select oil’s discount to New York-traded futures to $5 to $7 a barrel next year, BMO Capital Markets said in October. The price gap is currently at about $12 a barrel.

Demand for WCS has also risen after OPEC countries cut output of their heavier, higher-sulfur grades similar to those from the oil sands. Canadian oil will continue to be “well supported” in 2021, according to Goldman.

Also See: Enbridge Pipeline Linking Oil Sands to Midwest Wins Approval

To be sure, oil sands companies also face potential headwinds. Increasing numbers of banks and investors have shunned the industry because concerns over high carbon emissions. The pipelines that are under construction still face potential court delays, as well as political opposition.

Adam Waterous, chief executive officer of Calgary-based private equity firm WEF GP, is among investors expecting more profitability from the oil sands than shale. He estimates U.S. crude production will fall by about 2.5 million barrels a day in the next year as oil prices are still too low to earn attractive returns.

WEF controls two Canadian oil producers including Cona Resources Ltd., which bought Pengrowth Energy Corp. in January for about C$790 million ($620 million), including debt, and is currently embroiled in an attempted hostile takeover of Osum Oil Sands Corp.

“The best days of the U.S. oil industry are definitely behind us,” he said. “We are very bullish on Canadian oil sands where others are not.”

Becoming Green Is Not an Easy Task For Oil Companies

Exxon Mobil Corporation  has revealed its new five-year climate change plan to be in line with the Paris Agreement reduction targets.

Tue, December 15, 2020

Exxon Mobil Corporation (NYSE: XOM) has revealed its new five-year climate change plan to be in line with the Paris Agreement reduction targets. But the reaction has been muted, as these small, yet meaningful, reductions put them more in line with Chevron (NYSE: CVX), which is not exactly a leader in this either.

Nonetheless, the plan reflects the current environment for oil and gas companies. They know they will have to evolve in order to survive.

One of the main issues troubling the energy sector is low oil and natural gas price, which is caused by the massive decrease in demand. This decline was caused by the economic slowdown, triggered by the coronavirus pandemic. Unfortunately, this might not even be the biggest issue.


For years now, U.S. onshore production has been increasing. While OPEC has been decreasing production to balance the U.S. production, we still entered 2020 with more oil being produced than ever before.

And then there's the rise of renewable energy. Alternatives like solar and wind power are becoming more and more desirable than the older, carbon-based energy production. The popularity of startups in the electric vehicle industry this year is a clear sign that demand for gasoline will likely fall in the future.

Keeping in the mind the issues of the oil sector, investors' focus should be on the large well-diversified companies with strong financial positions, and both Chevron and Exxon fit that description. However, it seems that Chevron is in a comparatively better position, having overtaken Exxon as the largest U.S. oil company by market value in October. Although Chevron has taken on some additional debt, its debt-to-equity ratio only increased from 0.2 from the start of 2020 to 0.25 at the end of the third quarter. Overall, its balance sheet is stronger, so its position to keep increasing the dividend, as it already has for 33 straight years, seems firm

Mexico’s ESG Bond Has Skeptics Questioning 

Do-Good Bona Fides

In reality, there’s no actual guarantee the money raised will be used with environmental, social and governance considerations in mind -- so-called ESG factors that underlie a global market for $2.1 trillion of bonds

Justin Villamil
Mon, December 14, 2020,



(Bloomberg) -- The sustainable bond industry’s push into developing nations is sparking concerns about how sure investors can be that the money is being used for good, with Mexico’s sale the latest to raise eyebrows among skeptics.

The issue has come to the fore as Latin America becomes the new frontier for investors looking to do good at the same time they make money. Mexico issued 750 million euros ($910 million) of sovereign sustainable bonds in September, and the notes have since made their way into funds and indexes focused on securities that are supposed to help make the world a better place.

In reality, there’s no actual guarantee the money raised will be used with environmental, social and governance considerations in mind -- so-called ESG factors that underlie a global market for $2.1 trillion of bonds, mostly from established players such as the U.S., France and Germany. As issuance increases from developing nations with less robust controls, skeptics see a growing potential for “greenwashing,” or using vague goals of improving the planet to raise money cheaply.

“In the developing world, it’s very difficult because you don’t know where the money goes,” said Luis Maizel, co-founder of LM Capital Group in San Diego, adding that on top of the issues tracking how the money is spent, ESG metrics are hard to measure in any case. “You have to trust the issuer.”

Mexican officials outlined lofty goals for the proceeds, including spending on social services in underserved regions that was endorsed by the United Nations. But there’s no enforcement mechanism. The prospectus is clear: Even if the nation doesn’t use the money for social development or if the actual impact of the spending is zilch, investors have no recourse. Mexico’s Finance Ministry acknowledges that the programs meant to be financed with the bonds would have gone ahead in any case.

But by raising the money with ESG credentials, Mexico likely reduced its borrowing costs. Calculating the exact savings is difficult because of the complex variables that go into any issuance, but the interest rate was Mexico’s second-lowest ever in the euro market. The sale was more than five times oversubscribed and attracted about 80 investors that weren’t regular participants in Mexican debt sales, according to Natixis, which structured the notes.

The bonds have rallied since the sale, returning 3.1% compared with a 2.3% gain for a benchmark index.

Mexico doesn’t seem a natural fit for an ESG sovereign bond. The administration of President Andres Manuel Lopez Obrador has come under criticism for pushing to rescue the faltering state oil company while fighting the expansion of private renewable energy companies. His efforts to build a passenger train cutting through a sensitive rain forest has met with objections from environmental groups. This year, homicides in Mexico are on track to eclipse last year’s record, climbing 1.1% through October.

Julio Mariscal, the head of Latin American debt capital markets at Natixis, said that government officials aware of the reputation and fearing investor pushback opted for a more general sale of sustainable bonds, instead of a note with a specific “green” environmental designation.

Exxon, Marlboros

Julieta Brambila, a spokeswoman for the Finance Ministry, says the robust demand for the bonds shows traders’ confidence. “If there were concerns on the part of investors for the use of proceeds, they would not have bought the bonds,” she said.

Of course worries about the realities of sustainable investing are widespread. Criteria can be broad and vary widely from one index creator to another -- Exxon Mobil Corp. and Philip Morris International qualify by some measures -- leading critics to say it’s just another way for Wall Street to profit.

But with demand soaring as proponents tout a way for social justice to become part of investing, companies and governments globally have borrowed a record $447.8 billion this year in sustainable bonds, compared to $261.5 billion raised last year, according to data compiled by Bloomberg. Sales of social bonds in particular have skyrocketed globally and especially in emerging markets as poorer nations struggle to combat the pandemic, with both Chile and Ecuador among regional issuers.

United Nations

To be sure, the framework for Mexico’s sale does have some good points. For one thing, the country has committed to regular progress reports. In a relatively new area of finance with few real enforcement mechanisms anywhere in the world, the transparency pledge alone is a win.

Mexico’s bond was issued with the support of the United Nations Development Program, which helped pitch the deal to potential investors. It was the first security with an official stamp of approval from the UN, which plans to put its heft behind sales from other countries in the future.

Still, the UN acknowledges the lack of firm rules for ensuring the money goes toward the stated goals.

“We cannot guarantee that the fiscal space that is created through these operations doesn’t go somewhere else,” said Luis Felipe Lopez, the Development Program’s director for Latin America and the Caribbean.

Sage Advisory Services ESG analyst Andrew Poreda says Mexico’s ability to sell these types of bonds in the future will depend on the government’s transparency.

It comes down to whether Mexico is “going to showcase dollar-by-dollar spending,” he said from Austin. “Does this money really help?”

Toxic Spills in Venezuela Offer a Bleak Vision of the End of Oil

Fabiola Zerpa, Peter Millard and Andrew Rosati
Tue, December 15, 2020


Toxic Spills in Venezuela Offer a Bleak Vision of the End of Oil


(Bloomberg) -- Tropical rains have washed away most outward traces of the oil spill that ravaged Rio Seco this fall. But the fishing village in the shadow of Venezuela’s main refining hub bears the scars of deeper contamination.

Boats with oil-stained hulls must now travel further out into the Caribbean to make a catch. Crude has soaked the roots of nearby mangroves, leaving shrimp grounds barren. Seeing no future, dozens of fishermen and their families have fled their homes; those who are left loiter in the village, waiting for Petroleos de Venezuela, the state oil company known as PDVSA, to compensate for lost boats, equipment and sales.

Broke and subject to international sanctions, President Nicolas Maduro’s government is squeezing what it can from Venezuela’s collapsing oil industry, unleashing an environmental disaster in one of Earth’s most ecologically diverse nations. As the country’s vast resources become a toxic burden, Venezuela offers a bleak vision of the end of oil in a founding OPEC member.


Rio Seco is just the latest to bear the consequences, after the rupture of an offshore pipeline produced an enormous toxic geyser in the middle of local fishing grounds in September. The incident only came to light after Nelio Medina, the leader of a fishing council in the village, posted a video of the catastrophe on social media, causing an outcry.

It’s far from an isolated case. In the past, it took protests to force the state oil company to act, Medina said in an interview. Fishing boats have even blocked sea lanes to the refineries — a drastic move in a country known for persecuting dissidents. Yet the desperation is real: Medina sees no end to the problems caused by decaying pipelines.

“They should have replaced them a long time ago,” he said.

Venezuela boasts the world’s largest known oil reserves, but it’s struggling to produce any gasoline at all as sanctions constrain crude exports that are the foundation of its economy and bar the import of parts essential for maintenance. The result is a downward spiral of spills, scarcity and yet more economic suffering that disproportionately hits the poorest of the poor — those who can’t afford to join the estimated 5 million Venezuelans who have fled to neighboring countries.

A journey in November to the Paraguana peninsula that is home to PDVSA’s Cardon and Amuay refineries showed how far Venezuela has fallen. Because of endemic shortages, preparations for a round trip from the capital, Caracas, of just over 1,000 kilometers (about 620 miles) include procuring enough fuel for the route and a vehicle able to transport the necessary jerrycans.

Contrasts between Venezuela’s oil-fueled glory days and today’s dereliction are everywhere. The Paraguana complex was once the largest in the world, and at the turn of the century its refineries were such dominant exporters to the U.S. that even minor production glitches often sent gasoline futures soaring. These days only two of the six produce anything at all.

The complex has a processing capacity of almost 1 million barrels a day. Yet now even cooking gas is so scarce that many residents have to rely on firewood.

“We don’t understand how with two such large refineries next to us we don’t have gasoline or gas,” said Reina Falcon, 69, as she prepared fish for her four grandchildren and five great-grandchildren.

Falcon has seen PDVSA’s declining fortunes up close from the shores of the Amuay refinery town. Living so near to the complex, she is concerned about the health and safety of her family: A giant explosion in 2012 left at least 42 dead, and fires and blasts have become almost routine since.

Spills also occur regularly, and each time Venezuela is able to dodge sanctions and export a few tanker loads — as happened when an Iranian vessel loaded crude this fall — it frees up storage space to start pumping oil through leaky pipelines. Iran’s biggest fleet of tankers yet is at sea now bound for Venezuela.

Best practices went out the window two decades ago following a failed coup and nationwide strike against the late Hugo Chavez, Venezuela’s populist president who renationalized the industry and built up massive debts even during the era of $100-a-barrel oil.

Prices have cratered under Maduro and brought to a head the cumulative impact of neglect, corruption and mismanagement. PDVSA was one of the most technically advanced national oil companies as recently as the late 1990s; now it’s a hollowed-out husk presiding over the industry’s demise. Venezuela’s crude production hit a low of 337,000 barrels a day in June, just 10% of the country’s peak output back in 2001. PDVSA didn’t respond to email and texted requests for comment.

With global demand plummeting during the pandemic, the reality for Venezuela as elsewhere is that the world is moving on from fossil fuels. Oil-dependent economies everywhere will need billions of dollars to safely retire decades of infrastructure buildout, but in Venezuela’s case the money isn’t there and there’s little prospect of foreign aid, while the industry’s legacy stretches back a full century.

“The level of neglect has been brutal,” said Raul Gallegos, a Bogota-based director at Control Risks, an international consulting firm. What’s more, the impact is only going to get worse since the Maduro government “isn’t going anywhere,” he said.

Maduro, who tightened his grip on power in National Assembly elections this month and looks to have seen out the Trump administration, has expressed hope for improved U.S. relations under President-elect Joe Biden. But the prospects of a let-up in sanctions look dim. Biden criticized Trump’s push for regime change, but he also called Maduro a dictator.

Venezuela exported its first barrel of oil in 1539, when records show that a shipment was sent to the Spanish court to treat Emperor Charles V’s gout. Lake Maracaibo, a Caribbean inlet the size of Connecticut, is where the industry got its real start.

In 1922, Royal Dutch Shell made a discovery at Cabimas: Residents of Maracaibo some 20 miles away could see the fountain of oil on the other side of the lake from their rooftops. The giant oilfield then known as El Barroso II, later as the Costal Bolivar Complex, went on to make Venezuela the world’s top exporter by the end of the decade, a crown it held until 1970.

Oil revenues fueled state-of-the-art airports and highways in the 1950s, made it a destination for immigrants from Europe and neighboring countries, and helped pave the way for a gilded era of excess. Hilton established hotels in the capital and near the Caribbean coast; Concorde flew a direct Caracas-Paris service.

A century after the initial gusher, the streets of Cabimas are again soiled with crude. On Sept. 18, just a few blocks from the 1922 well site, oil bubbled up from a residential sidewalk during heavy rains and flooded several streets, according to videos and photos posted on Twitter.

Ninoska Diaz, a Cabimas resident who runs a small school from her home, said that she had to send students home when the school was flooded with oil that soaked desks and chairs, forcing her to throw them out. “We don’t see any response from the government,” she said by phone.

Oil spills are a chronic by-product of daily output in Venezuela, yet sanctions limit the scope for outside help even if Maduro were to seek assistance. Spills are larger and more frequent out of sight in the plains of the Orinoco River, where cattle ranches and crops are located, according to Ismael Hernandez, a remediation expert at the Central University of Venezuela. Maduro is prioritizing the region’s top fields in a last stand to maintain any output at all.

Read More: Venezuela Is Tearing Apart Oil Pipelines to Sell as Scrap Metal

Monitoring and evaluating spills is becoming harder because of fears of government retribution, said Alicia Villamizar, a biologist at the Simon Bolivar University in Caracas.

One egregious example came in July, when oil from a PDVSA refinery spilled onto the white sand and coral reefs of the world-renowned Morrocoy national park, home to more than 1,000 marine species, many of them endangered. As a signatory of regional conventions on safeguarding the Caribbean ecosystem, Venezuela has a duty to protect the area, said Villamizar, an expert on the region’s mangroves. Instead, it left the first response to environmental groups and locals.

Authorities played down the Morrocoy incident, accusing environmental groups of exaggerating the damage. Environment minister Oswaldo Barbera said in October that the park’s 25 kilometer coast had been “100%” cleaned up with “no oil to be found.”

Yet the environmental damage keeps coming. The El Palito refinery west of Caracas is prone to accidents and fires due to a lack of staff and spare parts. The refinery’s waste collection pits are overflowing and spill into the Caribbean when it rains, according to people working there. The nearby beach smells of diesel. Satellite images compiled by Eduardo Klein, coordinator of the Center for Marine Biodiversity at the Simon Bolivar University, show dark outflows from the El Palito and Cardon refineries as if they were weeping oil into the Caribbean.

The paradox is that the plunge in oil output has done nothing to curb Venezuela’s emissions. That’s because the industry is unable to capture and use as much gas as it did even a decade ago, so burns it off. Only the U.S., Russia, Iraq and Iran, all with far greater production, flared more gas last year, a World Bank study found.

Time may now being called on Venezuela’s industry. Global oil production was cut in response to Covid-19, and Venezuela’s OPEC+ partners are restraining how fast they restore output to put a floor under prices. Russia, while a longtime Maduro ally, produces a similar grade of heavy crude and has invaded some of Venezuela’s traditional markets. Canada’s tar oil has taken others.

The European oil majors that helped Venezuela develop its tar fields in the late 20th century are unlikely to return even if Biden precipitates a Maduro exit. Shell and Total are under shareholder pressure to curb emissions, and that means steering clear of the most carbon-laden grades of crude, like those of the Orinoco.

Maduro remains defiant.

“We’re prepared, we’ve trained, and Venezuela will not be stopped by oil at 10, nor less than 10 [dollars a barrel],” he said in April.

In Rio Seco, heavy off-season rains washed much of the chronic petroleum residue off the beaches in November, granting locals some temporary relief. PDVSA has yet to even estimate damages after the spill, and officials have told the community that they are waiting on financing to be able to offer compensation.

Giovanny Medina, 40, from across the gulf at Cardon, a fishing village that has managed to coexist with the refinery built by Shell in 1949, isn’t worried about competition from the displaced fishermen of Rio Seco. His chief concern is the relentless pollution that means taking his wooden skiff, known as a peñero, into deeper waters using more gasoline.

“We don’t want to be painting the hulls of our boats white anymore to cover up the crude stains,” he said. “We’re tired of doing this.”

CRIMINAL CAPITALI$M 

U.S. investigation report hits SEB, Swedbank and Danske Bank shares

By Simon Johnson and Colm Fulton
Tue, December 15, 2020


Signage is seen at the United States Department of Justice headquarters in Washington, D.C.

By Simon Johnson and Colm Fulton

STOCKHOLM (Reuters) - The Department of Justice (DOJ) and FBI are investigating SEB, Swedbank and Danske Bank over possible breaches of U.S. anti-money laundering regulations and fraud, Swedish newspaper Dagens Industri reported on Tuesday, sending the banks' shares lower.

Sweden had received requests for help from U.S. authorities investigating a Baltic money-laundering scandal that has already led to local fines for Swedbank, Danske and SEB, the newspaper reported.

The banks were being investigated by the DOJ, the FBI and federal police and a federal prosecutor in New York over possible fraud and breaches of anti-money laundering regulations, it added.

Although the banks have admitted to probes by U.S authorities over the past year, the report is a reminder that the scandal could yield further - and potentially heftier - fines, after each lender was penalized by local regulators.

"We have previously communicated, for instance in connection with our latest quarterly report, that U.S authorities continue to investigate Swedbank's historic work against money-laundering and historic publication of information," Swedbank spokeswoman Unni Jerndal said in response to the report on Tuesday.

SEB said it had received inquiries from U.S authorities, but was not aware of any allegations against it.

Danske Bank spokesman Stefan Singh Kailay said: "It is known that we are being investigated by authorities in Denmark, the U.S., Estonia and France, and we continue to be in close dialogue with them all."

The U.S. Department of Justice - which can also speak for the FBI - declined to comment.

"While all three banks have previously disclosed ongoing AML investigations by 'U.S. authorities', (the) FBI's involvement and 'fraud' appear to be new," Credit Suisse said in a note.

Shares in all three banks were down, with Swedbank off 7.7%, SEB 5.6% lower and Danske Bank down 3.3%.

"I wouldn’t say we are in a very different position compared to before the news broke … I think it's more of a reminder of the potential costs of the scandal," said Robin Rane, an analyst at Kepler Cheuvreux.

While local fines for lax money laundering controls in the Baltics have been hefty, they could be dwarfed by any punishment meted out by U.S. authorities.

Deutsche Bank was fined $7.2 billion and Britain's Barclays $2 billion over the sale of toxic mortgage debt in the run up to the financial crisis of 2008-2009.

And this year, U.S. bank Wells Fargo agreed to pay $3 billion to resolve criminal and civil probes into fraudulent sales practices.

Rane said Kepler Cheuvreux estimates additional fines of$441.84 million for Swedbank and $3.27 billion for Danske.

BALTIC SCANDAL

The scandal first surfaced in 2018 when Danske admitted that suspicious payments totalling 200 billion euros ($243 billion)from Russia and elsewhere flowed through its branch in Estonia.

It spread to Sweden, where Swedbank was fined a record 4 billion Swedish crowns ($477 million) by the country's Financial Supervisory Authority over flaws in its anti-money-laundering work and for withholding information from authorities.

Swedbank lost a third of its market value in 2019.

SEB was fined 1 billion crowns for failures in compliance and governance in relation to anti-money laundering controls in the Baltics.

Swedbank and SEB have both said previously that U.S. authorities were looking at their activities in the Baltic, but not given further details.

Danske Bank said in its 2019 report that it was under investigation by the U.S. DOJ and the U.S. Securities and Exchange Commission.

($1 = 0.8240 euros)

($1 = 8.3740 Swedish crowns)

($1 = 6.1207 Danish crowns)

(Reporting by Colm Fulton, Simon Johnson Supantha Mukherjee, Johannes Hellstrom and Helena Soderpalm in Stockholm, Jacob Gronholt-Pedersen in Copenhagen and Michelle Price in Washington; Editing by Johan Ahlander, Alexander Smith and Bernadette Baum)

CRIMINAL CAPITALI$M

Uber Fined $59M In California Over Refusal To Share Information On Sexual Assaults

Aditya Raghunath
Mon, December 14, 2020,


Ride-hailing company Uber Technologies Inc (NYSE: UBER) was fined $59 million in California on Monday for failure to comply with administrative laws regarding sexual assault and sexual harassment claims.

What Happened: The California Public Utilities Commission (CPUC) found the company’s response to questions about a U.S. Safety Report it released in 2019 unsatisfactory. The regulator also mandated that the company will still have to answer certain outstanding questions about passenger safety and earlier incidents of assaults.

Failure to comply with the regulatory instructions could lead to the cancelation of Uber's operating license in the state of California.


The ride-hailing company had earlier dodged many of the regulator’s questions, citing a privacy risk for the individuals directly connected to any incidents.

In January, the judge declined to accept Uber’s defense and suggested that the company could submit the response under a seal to maintain confidentiality. Uber continued to hold its stand, which ultimately resulted in the hefty penalty on Monday.

Why Does It Matter: Considering the confidentiality factor, the Judge presiding over the case suggested the use of unique identifiers instead of the name in order to protect the identity of the victims.

The $59 million penalty was affixed based on a $7,500 fine for each time the company failed to answer questions.

"Uber is a billion-dollar business that can easily afford to pay the $59,085,000.00 penalty," the judge remarked.

"Even during a pandemic where ridership has undoubtedly declined, Uber’s audited and certified revenues are substantial enough that the penalty amount imposed by this decision does not run afoul of the constitutional limitation against excessive fines."

The U.S. Safety report released in 2019 highlighted over a thousand instances of sexual assaults involving its customers and Uber drivers.

CRIMINAL CAPITALI$M

Singapore’s Lim Family, BP Sued for $313 Million on Oil Deals

Alfred Cang, Sun, December 13, 2020


(Bloomberg) -- Bank of China Ltd. has sued BP Plc in Singapore over its alleged role in fabricating oil deals with collapsed trader Hin Leong, in the latest effort by a creditor to recover losses after one of the biggest trading scandals in decades.

The Chinese bank requested that BP repay $125.7 million that it withdrew from the lender earlier this year based on sales of gasoil cargoes to Hin Leong, according to documents provided by the Supreme Court of Singapore. The deals were part of “fictitious purchase scheme conspiracy” to maintain Hin Leong’s liquidity since no real transactions took place, the bank said.

The lender also demanded $187.2 million from Hin Leong Trading Pte’s founder, Lim Oon Kuin, and his two children, the documents showed. The total sum includes the deals linked to BP and some other overdue payments on short-term loans, or letters of credit.

BP strongly refutes the allegations by Bank of China and will defend its position, the company said in a statement, without elaborating. Bank of China and the Lim family haven’t replied to emails seeking comments. Lim has earlier denied forging documents in a case brought by HSBC Holdings Plc, saying they were “mistakenly” issued.

Singapore, a major-oil trading hub, was shook by defaults and alleged fraud this year, roiling lenders who finance the opaque world of commodities trading in the city state. While the main protagonists were medium-sized trading firms such as Hin Leong, some leading global firms have also been ensnared in the debacle.

It’s not the only hit Bank of China has taken this year on oil. Earlier this year it agreed to repay some investors after one of its oil-linked trading products collapsed amid a plunge crude prices.

Hin Leong’s creditors, which also include HSBC and Singapore’s DBS Group Holdings Ltd., are fighting to recover funds from the insolvent firm, which has $3.5 billion in outstanding debt. Bank of China’s case, filed in late November, came after HSBC and the trader’s court-appointed managers PricewaterhouseCoopers started taking legal action against the Lim family.

Simultaneous Sale

The disputed gasoil deals took place in the first two months of this year. BP withdrew a total of $125.7 million on three letters of credit in early February from Bank of China, the court document showed. Hin Leong purchased a combined 1.5 million barrels of gasoil from BP in the deals and the oil major was able to present documents to prove the authenticity of the trades.

The bank was later informed by Hin Leong’s judicial managers that these trades were fabrications backed by non-existent cargoes financed by at least 27 letters of credit, including the three from Bank of China. The suit alleges that Hin Leong was able to maintain a semblance of financial stability and liquidity by selling and repurchasing forged cargoes backed by letters of credit worth $624 million.

“HLT fabricated documents on a massive scale,” Bank of China said in its suit. “The forged documents enabled HLT to mislead banks into extending financing to it and also acted as supporting documentation for fictitious gains or profits.”

Bank of China cited the court-appointed manager as saying that the trading firm sold gasoil to BP, which the oil major then sold back to Hin Leong at a higher price. Given the gap between the sales price and purchase prices and the short time period between the deals, it appears that the transactions were intended solely to provide liquidity for Hin Leong, the bank said, citing the appointed managers.

Bank of China claimed that it wasn’t aware of the “simultaneous sale” and buy-back transactions, alleging that documents were forged to “induce” the bank to make payments. It wouldn’t have made payments if it had known that the representations were false, it said.

CRIMINAL CAPITALI$M

Australia trial of Citi, others due in 2022, seven years after capital raising

SYDNEY, Dec 15 (Reuters) - Citigroup Inc and other finance companies and executives will likely face trial in Australia in 2022, people familiar with the matter said on Tuesday, seven years after a share sale they are accused of colluding on.

Citi, Deutsche Bank AG, the Australia and New Zealand Banking Group Ltd and six of their current and former staff are fighting charges of colluding as a cartel during a 2015 ANZ stock issue to withhold unwanted shares and prevent a price decline.

The legal proceedings, which could bring hefty fines and prison terms for the charged individuals, have drawn the attention of financial market participants around the world because of the implications for the way capital raisings are run.

All of the parties entered not guilty pleas last week.

The case has crawled through a Sydney court since the charges were brought in mid-2018, as lawyers for each defendant cross-examined prosecution witnesses and questioned whether regulators followed due process as they gathered evidence.

After the parties entered their pleas, the matter went before a Federal Court judge on Tuesday who said he hoped the trial would start in 2022, people familiar with the matter said. They declined to be identified.

A Federal Court spokesman was not immediately available for comment.

The matter is next due in Federal Court for an administrative hearing in February. (Reporting by Byron Kaye Editing by Robert Birsel)

CRIMINAL CAPITALI$M
German auditors supervisory boss leaves over Wirecard share deals

Mon, December 14, 2020

The logo of Wirecard AG is pictured at its headquarters in Aschheim


FRANKFURT (Reuters) - Germany's Federal Office of Economics and Export Control Bafa said on Monday that the head of the agency that regulates auditors in Germany had been relieved of his duties over personal dealings in Wirecard shares weeks before its collapse.

Bafa said the departure of Ralf Bose was intended to ensure the integrity of the regulator, Apas, until the facts of the case have been clarified.

There is no evidence that Bose broke any rules in trading shares of the payment processor while the federal agency was investigating the role of Wirecard auditor Ernst & Young (EY).


Bose told a parliamentary committee last week that he had dealt in Wirecard shares shortly before its collapse, buying them on Apr. 28 and selling them on May 20.

Reuters was not immediately able to contact Bose.

EY audited Wirecard's accounts for years until the company imploded following the discovery of a 1.9 billion euro ($2.3 billion) hole in its accounts.

The Wirecard case has become an embarrassment for German officials and authorities, who have been accused of failing to sufficiently monitor the company, which was once worth $28 billion and was widely praised as a rare German tech champion.

(Reporting by Hans Seidenstücker and Christian Krämer; Writing by Arno Schuetze; Editing by Alexander Smith)

CRIMINAL CAPITALI$M

Irish watchdog fines Twitter in landmark for EU data privacy regime

Tue, December 15, 2020

DUBLIN, Dec 15 (Reuters) - Ireland's data regulator has fined Twitter 450,000 euros for a bug that made some private tweets public, the regulator said on Tuesday, in the first sanction against a U.S. firm under a new European Union data privacy system.

The EU's General Data Protection Regulation’s (GDPR) "One Stop Shop" regime makes Ireland's Data Protection Commission lead regulator of Twitter, Facebook, Apple and Google in the bloc, due to the location of their EU headquarters.

GDPR has been in force since 2018, but the Twitter case is the first using a new dispute resolution system under which one lead national regulator makes a decision before consulting with the other EU national regulators.


Some European Union regulators objected to Ireland's preliminary Twitter ruling when it was issued in May, triggering a referral to the dispute resolution body, the European Data Protection Board to secure a two-thirds majority among member states.

The Twitter fine relates to a 2019 probe into a bug in its Android app, where some users' protected tweets were made public.

In particular it was levied due to Twitter's "failure to notify the breach on time to the DPC and a failure to adequately document the breach," the Data Protection Commission said in a statement.

The Irish regulator, which has more than 20 major inquiries into U.S technology firms open, has the power to impose fines for violations of up to 4% of a company's global revenue or 20 million euros ($22 million), whichever is higher.