BP Oil Spill Costs Hit $8 Billion

BP Oil Spill Costs Hit $8 Billion; Internal Report on Cause Readied

By Tom Bergin
September 3, 2010

BP Plc said the cost of dealing with its oil spill in the Gulf of Mexico had risen to $8 billion as the oil giant prepared to release the findings of an internal probe into the causes of the disaster.

BP published figures on Friday which showed that since it capped the well on July 15, it had spent around $90 million/day, in line with the spend rate while the well was gushing over 60,000 barrels per day into the sea.

Analysts had expected that BP's costs would fall off sharply after the well was sealed for good by drilling a relief well into the base of the blown out well and pumping it full of concrete.

However, a successful effort to install a temporary cap on the well delayed work on the relief well, which BP said on Friday was now likely to be completed in Mid September.

After this, the armada of rigs and ships, some of which cost $1 million a day to operate, working at the drill site can be stood down.

"Until it's killed for good, you can't move the kit away," one BP source said.

However, BP also indicated that there had been no major uptick in the amount of money being handed out to those affected by the spill, under the new independent compensation system, established in a deal with the White House.

On average, since Aug. 23, the Gulf Coast Claims Facility, a $20 billion fund headed by former government pay Czar Ken Feinberg, paid out around $3.5 million per day, broadly in line with the amount paid before BP handed over responsibility for administering claims.

Some investors had feared Feinberg could take a more generous approach to paying out damages.

BP shares traded up 0.2 percent at 393 pence at 0847 GMT, compared to a 0.4 percent rise in the STOXX Europe 600 Oil and Gas index

INTERNAL PROBE FINDINGS

BP is also preparing to issue a report on the findings of an internal probe into events on the Deepwater Horizon drilling rig, which exploded and sunk, leading to the oil spill.

BP declined to say when the report will be concluded or published but insiders said it could be released as early as next week.

The investigation was led by BP's head of safety and operations, Mark Bly.

BP said Bly was acting in an "independent" capacity, seeking the truth, rather than aiming to bolster the company's position in legal disputes with the government and the other parties involved in the accident.

U.S. politicians have already criticised the terms of the BP probe as being too narrow.

Some media reports citing leaks of parts of the probe say lower level employees will be blamed for making mistakes that contributed to the blast.

This could be seen as an attempt by BP to deflect criticism of top management and company culture -- something BP was accused of doing after a blast at its Texas City refinery in 2005, which killed 15 workers.

Shortly after the blast BP sacked junior employees for breaking company operating procedures which it said contributed to the deaths.

A later investigation by safety regulator the Chemical Safety Board blamed more institutional flaws including BP's culture of cost cutting.

BP critics in Washington will also check the report to see if Donald Vidrine, BP's "company man" or senior representative, on the rig, which was owned and operated by drilling contractor Transocean, contributed to the report.

Vidrine has declined at least twice to appear before a Coast Guard-Interior Department panel investigating the disaster, citing medical complaints, so any contribution from him could be interpreted negatively on Capitol Hill.

(Reporting by Tom Bergin; Editing by Erica Billingham and Hans Peters)