In 2022 -a year marked, among other factors, by the international rise in fuel prices and the ecological disaster in the Peruvian sea-, the Repsol group obtained extraordinary profits: 4,251 million euros (USD 4,496 million). That amount is 70.11% higher than the amount reported by the Spanish conglomerate in 2021.
The oil group, headquartered in Spain, is present in 25 countries on five continents and, by December 31, 2022, had a net worth amounting to €25,973 million (USD 27,480 million), as reported in its 2022 consolidated management report. A value that also shows an increase over the previous year of 13.95%.
However, alongside these positive results, the multinational faces litigation and sanctions in different parts of the world that, together, total at least USD 12,955 million. That is to say, an amount that triples its profits and represents nearly half of its global assets.
The countries in which Repsol has the most significant legal proceedings and arbitrations are Peru, the United Kingdom and the United States.
In Peru, the multinational is facing various legal proceedings and administrative sanctions for the spill of around 12,000 barrels of oil from the La Pampilla refinery - operated by the Repsol group - in January 2022. In total, all of them commit a sum of approximately USD 5,879 million.
In the United Kingdom, meanwhile, the multinational is involved in an arbitration for USD 5,500 million, which dates back to a decade ago. And, in the United States, it is dragging behind it a legal process after buying a company that brought with it a pending environmental contamination remediation. In the latter case, there is no specific calculation claimed, but the process is still ongoing for the companies that are trying to clarify responsibility for the issue.
Repsol also has tax litigation in 20 of the 25 countries in which it operates. These debts amount to at least 1,463 million euros (USD 1,576 million), which is the amount of provisions it manages in the event of losing these tax proceedings.
Peru represents the largest amount for litigation and sanctions
In Peru, on January 15, 2022, a spill of nearly 12,000 barrels of oil occurred at the Multiboyas Terminal No. 2 facilities of the Pampilla S.A.A. Refinery (Relapasaa) -a subsidiary of Repsol-, in the district of Ventanilla, in the constitutional province of Callao.
This crude oil leak generated the contamination of 11,000 hectares in 97 areas along 140 kilometers of the Peruvian coastline and caused the death of almost 2,000 specimens of wildlife. The Environmental Evaluation and Oversight Agency (OEFA) reported that at least 24 coastal marine areas are still contaminated. Of these, 20 are coastal formations (including beaches, cliffs, points, islands and islets) and four are offshore areas.
ENVIRONMENTAL DISASTER. In January 2022, the Peruvian sea suffered its worst damage in history, after almost 12,000 barrels of oil spilled at the La Pampilla Refinery, operated by Repsol.
Image: OjoPúblico / Marco Garro
A little more than a year after the environmental catastrophe, Repsol is facing million-dollar lawsuits filed by the National Institute for the Defense of Competition and Protection of Intellectual Property (Indecopi) - for USD 4.5 billion -, the Association of Victims of Repsol - S/5.134 billion, equivalent to USD 1.35 billion -, and different associations of those affected.
In addition, the company has received fines from regulatory entities, such as the Environmental Evaluation and Oversight Agency (OEFA), the National Forestry and Wildlife Authority (Serfor), the National Service of Natural Areas Protected by the State (Sernanp) and the Supervisory Agency for Investment in Energy and Mining (Osinergmin).
There are at least 13 administrative sanctioning processes, identified up to January of this year. In total, these total almost S/110 million (USD 28.8 million) in fines in first instance.
Together, the litigation and these sanctions accumulate around S/22,344 million (USD 5,879 million). This amount alone is greater than the group's overall extraordinary profits obtained in 2022 of USD 4,496 million. It represents nearly a quarter of its global equity (USD 27,480 million).
Despite the large amounts involved, Repsol does not set aside money for these legal proceedings because it classifies the claims as "remote risk". In other words, it considers that they will not proceed. In parallel, with respect to the administrative sanctioning processes, it has appealed most of them.
The other costs contemplated by the multinational in its financial statements are those related to containment activities, cleanup, remediation, compensation to affected parties (residents, fishermen and workers in the contaminated areas), among others.
As of December 31, 2022, expenses as a result of the spill amounted to USD 307.4 million. Of this total, USD 34.1 million were covered by the insurance company as an advance payment. Relapasas disbursed USD 129.6 million, leaving an outstanding balance of USD 177.7 million.
It should be noted that Mapfre is Repsol's insurer in Peru, which activated the USD 275 million policy after the oil spill. According to Peruvian law, companies involved in extractive activities must have civil liability insurance policies of at least 10,000 UIT (USD 13.1 million).
MINIMUM AMOUNT. According to Peruvian law, refineries and processing plants must have an insurance policy of at least 10,000 UIT.
Regarding compensation to those directly affected by the environmental disaster, the Single Register of Affected Persons - prepared by the Presidency of the Council of Ministers (PCM) - considers a total of 10,300 people, including fishermen, residents of the areas and other workers.
However, this figure does not include informal workers, such as street vendors on the beaches. The Ombudsman's Office identified at least 15,000 people affected in total.
From the official list, Repsol reported that more than 9,800 affected people have received compensation advances. And of these, full compensation agreements have been reached with more than 8,500 people. In other words, there are some 1,800 remaining within the group of those registered who are still awaiting compensation in accordance with their needs.
Lawsuits and proceedings in Peru that Repsol rejects
The largest lawsuits in Peru -and that Repsol's parent company has considered in its consolidated annual accounts report for 2022- are the lawsuits filed by Indecopi on behalf of the Peruvian State and the one filed by the Asociación Damnificados por Repsol on behalf of 10,268 people affected in Ventanilla.
The latter lawsuit for damages was filed in the Superior Court of Justice Puente Piedra-Ventanilla against La Pampilla Refinery and the insurance company Mapfre Peru, claiming S/5,134 million (equivalent to USD 1,350 million).
The lawyer of the Asociación Damnificados por Repsol, Gerardo Widauski, explained to OjoPúblico that the amount claimed in the lawsuit is based on a compensation of S/500,000 for each person affected. This, in turn, is made up of S/144,000 for loss of profits, S/56,000 for consequential damages and S/300,000 for moral damages.
Among those listed are both residents of Ventanilla and workers in the area. They also include street vendors who were not registered and therefore were not included in the official list of the PCM and were not compensated.
For its part, Repsol informed that Relapasaa was notified of this lawsuit last November 30, and that it has filed an appeal for annulment against the order of admission of the lawsuit. This appeal argues that there is an undue accumulation of claims, the lack of identification of the affected parties and lack of support in the amount claimed.
"In the opinion of the company's legal advisors, this contingency is qualified as remote," reads its annual financial report.
In view of Repsol's request for nullity, a preliminary hearing will be held this Monday, March 20, in which a decision must be made. That is to say, to define if the lawsuit will continue its process until it is resolved or if it will be filed.
On Monday, March 20, a hearing was held to decide whether to continue with the lawsuit of 10,268 people affected in Ventanilla.
The other lawsuit - filed by Indecopi against Repsol S.A., Refinería La Pampilla S.A.A. (Relapasaa), Repsol Comercial S.A.C (Recosac), the insurance company Mapfre, the shipping company Fratelli d'amico Armatori and Transtotal Marítima (as operators of the vessel) - requests a compensation of USD 4,500 million for civil liability for damages to the population.
The claim is composed of USD 3 billion for direct damages and USD 1.5 billion for moral damages suffered by consumers, users and third parties affected by the oil spill in the Peruvian sea.
This claim was filed in May 2022 and admitted by the Judiciary four months later. Once notified -in September last year-, Relapasa, Recosac and Mapfre also filed nullity appeals.
They point out, among other arguments, that there has not been a previous conciliation and insinuate that it is not Indecopi's competence, since it is not related to a case between company-consumer.
"We consider that this is unfounded with respect to its substantive arguments and should be declared inadmissible, since the claim is not based on a consumer relationship (company-consumer) and this institution would not have the power to act. Therefore, we maintain that the claim should be dismissed, as we have expressed before the judicial authority hearing the process", detailed Repsol when consulted by OjoPúblico.
Jean Pierre Araujo, lawyer of the Peruvian Society for Environmental Law (SPDA), explained that the lawsuits seek to repair different damages. "That of the association seeks compensation for damages directly generated to its associates; that of Indecopi is for affecting consumers in general," he said.
Repsol also faces three criminal investigations in the Judiciary. In mid-January 2022, the Specialized Environmental Provincial Prosecutor's Office (Fema) of Northwest Lima opened a preliminary investigation for the alleged crime of environmental contamination against the legal representatives, officials of La Pampilla Refinery and those responsible.
The last update of the process found that the underwater pipeline called Pipeline End Manifolds (PLEM) broke due to manufacturing errors, but so far there has been no further progress.
In this regard, Araujo said that, given the complexity of gathering evidence and expertise, the prosecutor asked for an extension of time to investigate. "This should end, approximately, in July of this year; or it could be earlier, depending on the prosecutor", said the specialist.
IMPACT. Indecopi estimates that around 700,000 people are affected by the oil spill in the Peruvian sea.
Image: OjoPúblico / Marco Garro
The oil spill in Ventanilla also caused the OEFA to impose seven coercive fines on Relapasa, which were cancelled. But, at the same time, the company faces - according to information from last January - 13 administrative sanctioning processes (PAS) totaling almost S/110 million (USD 28.8 million) in fines imposed in the first instance by OEFA, Osinergmin and Serfor.
Of all of them, at least 10 fines -equivalent to S/70 million- were appealed by the oil group.
It should be noted that one of the fines initially imposed by OEFA for S/ 5.3 million was appealed by Repsol and the Environmental Oversight Tribunal declared the fine null and void, but then ordered a recalculation. OjoPúblico learned that now the penalty has been increased to S/19.8 million, according to the resolution issued by the Court. This process is still under appeal.
The penalized faults were due to Repsol's failure to identify the affected areas and the cleanup or remediation of the areas. In addition to this, the company reported false information on the amount of oil spilled, as well as abandoning, acting cruelly and causing the death of wildlife specimens, among others.
"The company has paid several of them [the fines], while others have been appealed to higher instances because we consider [that] they are not applicable. Of course, if these higher instances confirm them, Repsol will abide by what the country's authorities determine," the company said.
At the same time as these proceedings, there are two others under evaluation by the National Service of State Protected Areas (Sernanp), whose fines could reach S/92 million, and one initiated by the General Directorate of Capitanías y Guardacostas (Dicapi), which could involve more than S/4 million.
Fishermen seek to reconcile compensation with Repsol
As reported by Repsol, of the 10,300 people affected by the oil spill who were registered, some 9,800 have received advances of S/3,000 in compensation that were scheduled to be delivered every 30 days.
However, this schedule has not been met, according to Luis Antonio Diaz Barroso, president of the Association of Artisanal Fishermen of the Aucallama district. Instead, the leader maintains, payments have been occurring every 40 to 50 days or even after two months.
"It has been 14 months [of the spill] and we have only received nine advances to date. I understand that the tenth has been approved, but we have not received the minutes, it is not official yet," said the fisherman.
Meanwhile, a group of 8,500 fishermen have signed an out-of-court agreement for total compensation, which ranges from S/60,000 to S/65,000, discounting the advances paid, according to a document to which OjoPúblico had access. This amount is for lost profits.
This agreement was rejected by another group of victims for having clauses that they consider detrimental, such as conditioning the payment of compensation in 2023, provided that the Government prohibits fishing on the coast; or making them renounce rights, claims, titles, actions or lawsuits that may arise in the future.
On March 27, 19 fishermen's associations will seek conciliation with Repsol to define compensation criteria.
For this reason, a commission of 19 fishermen's associations from Chancay, Aucallama, Ancon and Ventanilla that did not sign the out-of-court agreement has resorted to conciliation to define the criteria for compensation. "Before, we were more than 3,000, but some already signed with Repsol, and now we are 739," explained Diaz Barroso.
These artisanal fishermen's associations have already had two meetings with Relapasaa and a third meeting is scheduled for Monday, March 27. In this meeting, both parties will present the compensation proposal and the criteria considered, the fishermen's leader explained.
The meeting will be held in the presence of national observers, such as the Ombudsman's Office and the National Human Rights Coordinator (CNDDHH), and international observers, such as the Special Office of the United Nations (UN) in Peru and, eventually, the Inter-American Commission on Human Rights (IACHR).
Repsol's litigation in the US and UK
Abroad, the two strongest litigations that Repsol faces are for its operations in the United States and the United Kingdom. In both cases, the lawsuits are linked to the purchase of shares of companies that were in dispute due to contamination remediation or non-compliance with investments.
The case involving the largest amount of money is the UK case, in which Chinese state-owned companies Sinopec and Addax are seeking payment of USD 5.5 billion for mutual investment commitments that failed to materialize after buying 49% of the shares of Talisman Sinopec Energy UK Limited (TSEUK), in 2012. The initial claim was against Talisman Energy Inc. But, in 2015, Repsol acquired this company and, with it, dragged the conflict.
In its financial statements, Repsol reports that the dispute is about events prior to the acquisition of Talisman Energy, so it is not related to any activity of the group. Despite this, at the end of 2022, the oil company had provisions for the case, amounting to 779 million euros (USD 822 million).
In the United States, meanwhile, the legal dispute arose from the purchase of shares of the company YPF S.A. This company was involved in a case of environmental contamination from the last century, which affected the Passaic River, Newark Bay and other waters and nearby properties in New Jersey, during the manufacture of a chemical weapon used in the Vietnam War.
The UK arbitration involves some USD 5.5 billion and the USA case has been in dispute for more than 40 years.
This fact has been in dispute for more than 40 years. The origin dates back to 1986, when Maxus Energy Corporation (Maxus) sold its chemical subsidiary Diamond Shamrock Chemical Company (Chemicals) to Occidental Chemical Corporation (OCC). At that time, Maxus and OCC had an indemnification agreement for contamination from the former Chemicals plant.
But, in 1995, Maxus was acquired by YPF S.A. And, later, in 1999, Repsol S.A. acquired YPF, which involved the Spanish company in a lawsuit filed -in 2005- by the State of New Jersey to make these companies pay for the remediation of the environmental contamination.
A decade later, Repsol and YPF agreed to pay USD 65 million each to the State of New Jersey. The Spanish company did pay, but later sued OCC claiming the amount. The process is still ongoing.
Legal provisions considered by Repsol
In total, the Spanish group has provisions of 5,132 million euros (USD 5,481 million), which are divided into four items: 779 million euros (USD 822 million) for legal proceedings, 1,739 million euros (USD 1,834 million) for asset dismantling, 1,091 million euros (USD 1,176 million) for the consumption of CO2 emission rights, and 1,523 million euros (USD 1,641 million) for other provisions.
However, it is precisely the legal proceedings section that has not presented any variation compared to the previous year, which also amounted to 779 million euros. The main amount is for the Addax and Sinopec lawsuit in the United Kingdom.
In other words, despite the spill of 14,000 barrels of oil and the legal proceedings it is facing in Peru, the company does not consider reserves to cover these cases because it classifies the lawsuits as remote risk.
What the company does report is that, in some administrative sanctioning processes in process, they foresee a negative result, so the corresponding provision has been recorded, although they do not detail the amount.
RESERVES. Legal provisions remained unchanged from the previous year. They remain at 779 million euros.
Repsol's tax liabilities
Repsol also has other pending tax cases, such as tax litigation, in 20 of the 25 countries in which it operates. Although it does not detail the total amount of these, it does report provisions to cover the tax risks associated with these processes, which amounted to €1,463 million (USD 1,577 million) as of December 31, 2022. And, additionally, it reports another 240 million euros (USD 258 million).
"This account will cover the tax litigation pending resolution, which in case they lose it, they will take the provision to pay it. When the Court tells them to pay, that provisioned amount goes directly to the payment so that they do not have to finance themselves", explained tax lawyer Miguel Carrillo.
In detail, their tax litigation is in Algeria, Bolivia, Brazil, Chile, Canada, Colombia, Spain, the United States, Indonesia, Libya, Luxembourg, Mexico, Norway, the Netherlands, Peru, Portugal, the United Kingdom, Singapore, Trinidad and Tobago, and Venezuela. In general, they are for the fiscal years 2014 to 2022.
TAX. The Repsol group is involved in tax litigation in 20 of the 25 countries in which it operates, including Peru.
In the case of Peru, it is for the fiscal years 2017 to 2022. As reported by the oil company, the Sunat modified Relapasaa's 2014 income tax liquidation, by questioning the transfer prices of certain sales and purchases. In 2022, almost the total amount originally demanded by Sunat was annulled, but the company contested for the part not annulled.
The other case is due to the fact that Osinergmin demanded from Relapasaa the payment of the "contribution for regulation of the companies of the hydrocarbon sub-sector" for the sales of aviation fuel. However, the company points out that such sales are not covered by this contribution as it is a product dedicated to an exempt use. For this reason, the group appealed the case through administrative channels.