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No longer in the deep end

17 October 2011 By Fiona Maharg-Bravo

BP has closed out one big legal front, but the Macondo saga is still far from over. In the months following the accident, the UK oil major’s partners in the well blamed BP and refused to pay any of the bills. Now Anadarko, with a 25 percent stake in the well, has agreed a $4 billion settlement. The move follows a $1.1 billion BP deal with Mitsui, a 10 percent partner in the well, in May.

The $4 billion settlement is a fraction of the $41 billion that BP estimates the spill will eventually cost. The comparison isn’t quite right, since that number includes BP’s legal bills, voluntary initiatives and estimates of fines, which are excluded from the settlements. BP is also getting less than the $6.1 billion it had billed Anadarko so far. But it is still more than BP received from Mitsui. Had Anadarko paid in the same proportion as the Japanese, BP would only have received about $2.7 billion.

Together, BP now has $5 billion more in cash to pay for the spill. Yet the really critical question still hangs. Was BP grossly negligent under the Clean Water Act? If it was, potential fines could be over $17 billion. That particular legal battle starts next year in a New Orleans court, where all the claims will be decided. It is not clear how long it will last, but is likely drag until 2013 at least.

The fact that Anadarko has dropped these allegations of gross negligence suggests the burden of blame, if it comes to that, will be shared. That, as much as the cash involved, led BP shares upward. Investors may also be betting that BP will extract some cash from two key contractors involved in the well construction and rig equipment – Transocean and Halliburton. So is Anadarko: it has asked for a portion of the claims recovered by BP from third parties.

Some welcome clarity is beginning to emerge from the inevitable legal wrangling that resulted from the Macondo spill. But the troubles, all round, are far from being settled.

 

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