Tuesday 30 June 2015

BP Plc. To Face Up To $60 billion In Cost For 2010 Oil Spill

The article takes a look at the total cost of the oil spill that BP could end up paying for the 2010 Gulf of Mexico oil spill.

BP plc was involved in the biggest oil spill in Gulf of Mexico in 2010. In the result of the oil spill, eleven rig workers died because of the blowout, while significant amount of oil leaked into the deep ocean and caused huge environmental damage.
Carl Bieber, US federal judge, in 2014 deemed the company as “grossly negligent.” He ruled maximum fine to be forced on the oil company under the CWA. His ruling related to BP’s fine might now come any time and can be as much as 413.7 billion.
The London oil company has spent a massive amount on cleanup of the oil spill. The company has spent approximately $43.8 billion. According to analysts, the costs are most likely to cross $60.2 billion to $68.2 billion mark, which will hurt BP immensely, among falling oil prices.
According to Fuel Fix, Brendon Barnes, an analysts at Bloomberg Intelligence has also stated that 5 Gulf coast have also sued BP for the harms. Under the Act of Oil Pollution, these 5 states are looking for a total compensation of around $35 billion.
Mr. Barnes related to issue said, “It’s highly unlikely, that the states will be awarded an amount close to $35 billion.” He thinks that the states might witness $650 million to almost $1.5 billion in compensations at most, and it looks doubtful that the company will settle with them. He also said, “So far, the five Gulf states have agreed to hold off on filing Natural Resource Damage claims – the claims that are the most difficult to predict. Natural resource damage actually tries to monetize the value of trees, different aquatic organisms, so it’s very uncertain.”
On the other hand, BP is also witnessing pressure from residents and other businesses of the Gulf. As per Mr. Barnes, company’s economic business losses have reached up to almost $160,000 in the past few years. He assesses that the claims might add another $12.4 to $13.5 billion for BP while other claims might total up to $9.7 billion.
William Hares, Intelligence Energy Analyst at Bloomberg said, “Barring a worst-case scenario, BP will continue to exist, though the impact from the litigation will be felt by investors. Something has to give as it faces tens of billions of dollars in incremental penalties.”
Mr. Hares said, BP will be evaluating every situation before coming up with a decision, which will include its capital spending and dividends cutting decision. BP believes that the oil prices will stabilize soon so that it might witness satisfactory growth and enhance on its liquidity position.

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