BP oil spill response costs hit 6.1 billion dollars

9th August 2010, Comments 0 comments

BP has spent 6.1 billion dollars in response to the huge Gulf of Mexico oil spill, it said on Monday, but the amount is set to spiral on expected massive compensation payouts.

"The cost of the response to date amounts to approximately 6.1 billion dollars (4.6 billion euros)," the group said in an official statement.

The costs include spill response, relief well drilling, the "static kill" and cementing of the damaged well, grants to Gulf states, claims paid and federal costs.

The company had announced last week that it had cemented and closed the well, which ruptured after an explosion on the Deepwater Horizon rig April 20 that killed 11 workers and unleashed the biggest maritime spill on record.

BP has forecast that the disaster will cost a total of about 32.2 billion dollars, after pushing the group into a 16.9-billion-dollar loss in the second quarter -- which was the biggest quarterly loss in British corporate history.

The disaster has forced out BP chief executive Tony Hayward, who was slammed by the media for his clumsy handling of the spill response.

The company is meanwhile seeking to sell 30 billion dollars of assets over the next 18 months to help meet the clean-up bill.

"The MC252 well has been shut-in since July 15; there is currently no oil flowing into the Gulf," the group said on Monday.

It added: "Following the completion of cementing operations on the MC252 well on August 5, pressure testing was performed which indicated there is an effective cement plug in the casing. BP believes the static kill and cementing procedures have been successful."

In early afternoon deals on the London stock market, BP's share price rallied 1.69 percent to 432.55 pence, while the FTSE 100 index gained 1.40 percent.

An estimated 4.9 million barrels, more than 205 million gallons, spewed from BP's ruptured well in the 87 days from the beginning of the disaster until the leak was finally capped on July 15, the US government has said.

About 800,000 barrels were captured by containment operations that syphoned oil from the gushing wellhead to ships on the surface.

Under the law, fines could be as much as 4,300 dollars per barrel spilled, if negligence is proven. This means BP could theoretically face fines of up to 17.6 billion dollars for the 4.1 million barrels that poured into the sea.

Peter Hutton, oil analyst at NCB Stockbrokers in Dublin, described the cement plug as a positive development -- but warned over potential legal costs arising from the worst man-made environmental disaster in US history.

The plug is a "very positive step but not the end of this", Hutton told AFP, noting that BP was on course to finish drilling two relief wells.

He added: "The real overhang is legal -- whether BP risks being found grossly negligent.

"Plugging the well at 4.9 million barrels caps the volume, but at potentially 4,300 dollars per barrel if grossly negligent and no recovery from partners, this would set liability significantly above present provision."

© 2010 AFP

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