Fayed denied stake in oil millions below his own home

In a business career spanning six decades of wheeling and dealing, Mohamed Fayed has prided himself on his ability to sniff out a profit across his eclectic entrepreneurial empire. His only blind spot, it seems, is when the income stream lies directly beneath his feet.

The multi-millionaire Harrods owner yesterday lost the latest round in his battle to secure a share in the profits made from three oil wells that operated under the fields of his sprawling estate in Surrey without his knowledge for more than a decade.

Mr Fayed, 76, was last year awarded a stake in the tiny oil reservoir discovered in the ground beneath Barrow Green Court, his baronial pile in Oxted, near Reigate.

The nine per cent share in the proceeds from the Palmers Wood Oilfield, which has pumped just over a million barrels of its stockbroker belt crude since 1990, was granted by the High Court after it was revealed the owners of the wells deliberately withheld information about the location of its pipelines.

But yesterday three judges at the Court of Appeal allowed a challenge against the award by the oil company, Star Energy, and drastically reduced Mr Fayed's new-found oil wealth from £621,180 plus interest to just £1,000 for "technical trespass" of his land. The court heard that the compensation received by the Harrod's owner could have been as little as £82.50.

Under English law, although the soil and rock beneath a landholding belongs to its owner, any oil belongs to the Crown, which in turn grants drilling and extraction rights. Star Energy and its predecessor acquired the right to dig beneath Barrow Green Court and the adjoining farm in 1986, and sank three wells diagonally under the estate to a depth of up to 700 metres.

Mr Fayed, whose £555m business portfolio ranges from Harrods and the Ritz Hotel in Paris to Fulham Football Club and an American mapping company, first noticed the prospecting activity in 1992 when he spotted a small oil rig on land adjacent to his farm.

When solicitors acting for Mr Fayed wrote to Star Energy asking for information, the company declined to reveal where its bore holes were sited. It said locations could not be revealed for "reasons of commercial confidentiality".

It was not until 2006, when Mr Fayed saw records held at the British Geological Survey, that he realised the pipelines ran under his property and decided to add "oil baron" to his list of business activities by suing Star Energy for a share of its profits. Up until 2007, the total amount extracted from the little-known Surrey oil belt was 1,006,000 barrels worth about £10m.

Mr Justice Peter Smith, sitting in the High Court last year, ruled that Star Energy and its predecessor at the Palmers Wood Oilfield had deliberately withheld the information about the location of their wells from Mr Fayed and his Liechtenstein-based holding company, Bocardo, because they had expected "trouble" if he found out.

Speaking after the court ruling in his favour last July, Mr Fayed said: "I am satisfied with the decision. Justice has been done."

But the Court of Appeal yesterday overturned the finding that Mr Fayed was due a share of the proceeds from the oil because of trespass on his land, ruling that the drilling had caused no damage and did not impinge on any of his rights. Recognising a "technical trespass", the court said Mr Fayed was due compensation that could have been as little as £82.50 but this had been increased to £1,000 in recognition that Star Energy would have been anxious to avoid delays.

Lord Justice Aikens said the case raised "interesting issues" about the rights of landowners sitting on top of oil deposits, adding: "Bocardo neither owned the oil found beneath its land nor did it have any right to bore, search for or get that oil."

A spokesman for Mr Fayed said: "We are very disappointed by this result and we will be seeking leave to appeal in the House of Lords."