Nonprofit, nonpartisan journalism. Supported by readers.


BP settlement: BP to get $4 billion for oil spill cleanup

Anadarko Petroleum Corp will pay BP Plc $4 billion toward clean-up of the Gulf of Mexico oil spill, far less than BP might have won in court, but the deal could reduce the overall cost of the disaster for the British group.

Under the settlement announced on Monday, Anadarko said it will no longer pursue its allegations of gross negligence against BP. Anadarko was a 25 percent partner in the doomed Macondo well, and BP had sought payments to offset the costs of the spill.

BP shares rose 2.2 percent in London on news of the settlement. Anadarko shares were up 3.8 percent to $73.27 in afternoon trading on the New York Stock Exchange.

“We regard it as favorable for both companies,” BP Chief Executive Bob Dudley told reporters.

Anadarko could have been on the hook for 25 percent of the cleanup costs, compensating those affected, and paying any government fines. It could only avoid this responsibility if it proved that BP had been grossly negligent — something which could, potentially, have added around $18 billion to the total amount of fines BP faced.

Anadarko would still be liable under the deal with BP for any fines payable to the U.S. government.

Fines for leaking oil into U.S. waters are assessed at a level of $1,100 per barrel, or $4,300 if gross negligence is proven. The government has said the Macondo well leaked almost 5 million barrels into the sea.

BP has said the total bill for the oil spill, including government fines, will be $42 billion. This suggests Anadarko could have faced a total bill well above the $4 billion it agreed to pay.


Investors have priced in a final cost to the company from the spill that is far above BP’s estimate. Analysts say deals such as the one announced Monday make the worst-case scenario — a final bill in excess of $70 billion — look less likely.

“We maintain our view that the ultimate cost to BP could fall … substantially below the cost inferred by the share price fall since the accident,” said Richard Griffith, an oil analyst at Evolution Securities.

In May, BP agreed to accept $1.1 billion from the third partner in Macondo, Mitsui & Co, to cover its 10 percent share of cleanup costs.

BP’s lawsuits against companies it hired for the failed drilling project are among the hundreds of claims still pending before a federal judge in New Orleans. A trial date has been set for February next year.

To share the cost of the spill and cleanup, BP sued Transocean, owner and operator of the sunken Deepwater Horizon rig, cement specialist Halliburton, and Cameron International Corp, which designed the blowout preventer, a device that was supposed to stop the surge of oil.

Key to forcing Transocean to meet the cleanup bill — BP has sought the full amount from the drilling contractor — is convincing a court that Transocean was grossly negligent.

If BP does recoup cash from Transocean or Halliburton, it will pay a portion of this — up to $1 billion to Anadarko under the terms of the deal.

Two lengthy government inquiries have laid the lion’s share of the blame for the blowout at BP’s door.

The rig blast killed 11 men and caused more than 4 million barrels of oil from the Macondo well to spill into the sea.

The case is In re: Oil Spill by the Oil Rig “Deepwater Horizon”, U.S. District Court, Eastern District of Louisiana, No. 2:10-md-02179.

You can also learn about all our free newsletter options.

No comments yet

Leave a Reply