BG at centre of potential corruption scandal

BG, the exploration and production business spun out of the former state-owned British Gas business, was at the centre of a potential corruption scandal last night with one current and two former managers arrested over the way permission was obtained for a controversial new liquefied natural gas (LNG) plant in Italy.

Construction on the €500m (£334m) facility at Brindisi in the south of the country - championed by Tony Blair on BG's behalf - was at a standstill last night as police sealed it up, leaving BG unable to say when work might restart but hopeful it could still meet a 2010 target for commercial operations.

Prosecutors told a news conference in Brindisi that Giovanni Antonino, the port's former mayor who supported the project, was arrested as part of the investigation into alleged corruption.

Franco Fazio a current member of BG staff was also arrested along with former staff members, Fabio Fontana and Yvonne Barton.

BG said last night that it would never sanction corruption.

It admitted that the project was already well behind schedule amid opposition to the plant from environmentalists and some politicians.

A company spokesman said: "It is part of our key business principles that we do not tolerate corruption in any form, direct or indirect.

"We are fully cooperating with the investigation but we cannot comment further or prejudice the ongoing investigation."

The firm, which is also involved in building a large LNG import facility in south Wales known as Dragon LNG, confirmed that work has stopped on the Brindisi site.

"We do not know when it will restart. We have no crystal ball, but last week we said we targeted 2010 for it to come on stream," said the spokesman.

Judicial sources, quoted by Reuters, said the probe was focused on the alleged payment of a bribe of 360m old Italian lire, about €186,000, for an authorisation to start works on the LNG terminal.

Prosecutors said a total of 27 people were being investigated.

Police and tax authorities have seized some documents from the economic development and environment ministries related to the probe, they said.

There were no immediate comments from the ministries but BG said it had obtained full authorisation from the Italian government in January 2003.

Mr Blair apparently lobbied for the scheme to be sped up when he visited Rome in November 2006.

BG originally planned to start up the terminal in 2007, but the expected date has gradually been pushed back to 2010 due to local protests from environmental groups and politicians.

Italy, which depends on natural gas imports to cover some 85% of its needs, has been seeking to diversify supplies, a major part of which come from Russia and Algeria via pipelines.

BG plans to bring gas by ship from Egypt or another of its gas markets to discharge in Italy.

The gas is frozen for transportation and then warmed up again for onward movement to industrial and domestic markets via pipelines.

BG announced that it had tied up a deal for further LNG supplies from Nigeria. The company is to take 2.25m tonnes of LNG a year for 20 years from a plant at Bonny Island from 2011 or 2012.

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