The FT reports that US and Mexican oil companies are to be given rights to drill in a previously disputed area of the Gulf of Mexico under a landmark deal between the two governments that reflects their eagerness to develop domestic oil and gas production. An area of the gulf along the maritime boundary between the two countries, long left unexplored because of legal uncertainty about rights over its resources, will be made available to US oil groups and Pemex, the Mexican state oil company. The WSJ says that the dispute had lasted for over a decade. US and Mexican officials will work together to ensure safety standards are met. One of the potential drilling sites, close to the US maritime border, is under 9,000 feet of water – twice as deep as was drilled by the Deepwater Horizon rig that was involved in a massive oil spill in 2010. Read more
BP may agree to pay up to $25bn to settle all charges, including possible criminal charges, with the US government over the devastating Gulf of Mexico spill, according to an analyst at Morgan Stanley, the FT says. This would be double the figure the company has set aside. Martijn Rats, head of European oil research at Morgan Stanley, predicted there was a 70-80 per cent possibility that BP would agree a deal on civil and criminal charges before the end of February, ahead of the start of the civil litigation over the accident. Bob Dudley, BP’s chief executive, has repeatedly said that BP would be willing to settle, but not at any price. Asked about the possibility of a settlement earlier this week in London, Mr Dudley declined to comment, saying it was too sensitive a time to talk about it. However the newspaper says a person familiar with BP’s thinking said that the idea that the company was negotiating over a settlement worth about $25bn was “completely unfounded.” The person added: “There is no factual basis for the suggestion that there is discussion in that range.” Read more
BP is on track to win 11 new leases for oil exploration in the Gulf of Mexico, the FT reports, after lodging the highest bids in all but four of 15 leases in a sale held in New Orleans on Wednesday. The 11 leases would cost $27m if awarded and would require much greater expenditure if BP proceeds to drill wells on them. It remains the largest holder of leases in the gulf, and in October was awarded its first permit to drill in the region since the 2010 disaster on the Deepwater Horizon platform, which BP operated. The leasing round results were announced as a report on lessons from the disaster was published by the National Academies, the US science and engineering advisory body. The expert committee, commissioned by the US interior department, criticised both the companies involved in the accident and offshore regulators and raised the question of whether “the good intentions” of the industry and the authorities would be “a start toward recognition, acceptance, and active management of the risks inherent in offshore oil and gas development, or … a transitory response.”
Transocean, the owner of the Deepwater Horizon drilling rig that sank in the Gulf of Mexico last year, is planning to take further legal action against BP as it seeks to prove that the British company should be liable for almost all the costs of the disaster, the FT reports. Legal arguments from Transocean, which could be filed in the next few days, will be based on the contract that it signed with BP to work on the Macondo well, which it says protects it against claims for damages, fines and other penalties. BP has already taken a charge of $41.3bn for clean-up, compensation and other costs, and has sued Transocean for at least $40bn – alleging that the spill was “caused by Transocean’s multiple failures”. Both BP and Transocean were found by official inquiries to have been at fault over the accident on April 20 last year that killed 11 men and caused the largest ever accidental oil spill. However, BP signed a contract that agreed to “protect, release, defend, indemnify and hold harmless” Transocean, its drilling contractor, from “all claims, demands, causes of action, damages, costs, expenses … judgments and awards of any kind of character, without limit and without regard to the cause or causes thereof”. Read more
BP, Transocean and Halliburton, the three companies at the heart of the Deepwater Horizon disaster last year, have been formally charged by the US government with breaches of offshore regulations, in a move that could lead to the first official penalties arising from the accident, the FT says. The Interior Department’s Bureau of Safety and Environmental Enforcement, the new regulator formed at the start of the month from what had been the old Minerals Management Service, said the three companies had between them breached regulations 15 times. The violations linked to the explosion on the rig last year, which killed 11 men, included failure to “protect health, safety, property and the environment by failing to perform all operations in a safe and workmanlike manner”, and not taking “measures to prevent unauthorised discharge of pollutants into offshore waters”. BP, which owned the Macondo well and was in charge of the project, faces a total of seven charges. Transocean, which owned and operated the drilling rig, and Halliburton, which provided the cement intended to seal the well to prevent escapes of oil and gas, face four charges each. Read more
Bob Dudley, BP’s chief executive, has sought to reassure staff after a torrid 10 days during which the UK oil group endured a slew of negative headlines about its operations in Russia and the Gulf of Mexico, dismissing them as “short-term noise”, the FT says. Mr Dudley told employees in an internal e-mail sent on Monday that they should look “away from the headlines” and instead focus on the progress the company has been making in trying to recover from last year’s devastating spill in the Gulf of Mexico. His comments, while not materially new, underline the concern among BP’s management over recent negative headlines and a poorly performing share price, as well as the need to reassure employees that the company is making progress.
Tropical Storm Lee weakened late Sunday into a depression as it came ashore and moved slowly northwards, USA Today reports, but there were warnings further flooding could be seen. Areas of Alabama, Louisiana and Mississippi near the coast reported scattered wind damage and flooding, but evacuations appeared to be in the hundreds rather than the thousands. Although wind speeds weakened, the National Hurricane Center warned of extremely heavy rainfall that could lead to extensive flooding and flash-flooding over much of the south-east in the next few days, says the LA Times. Workers returned and production resumed at some oil and gas platforms in the Gulf of Mexico on Sunday, reports Bloomberg.
Exxon Mobil has announced the discovery of at least 700 million barrels of oil in the Hadrian field under the Gulf of Mexico, says Bloomberg. Work on the field had been delayed following the US moratorium on deepwater drilling after BP’s Macondo spill in the region, the FT notes, but Exxon has revealed the biggest Gulf of Mexico find since BP’s one billion-barrel Thunder Horse discovery twelve years ago. Exxon estimated more than 85 per cent of the resource was oil. BHP Billiton Petroleum and Royal Dutch Shell have also announced progress on drilling efforts in the area in recent days. Read more
Moex Offshore, one of BP’s minority partners in the Macondo well that ruptured in last year’s Gulf of Mexico accident, has agreed to pay the UK oil group $1.1bn to settle all claims between the two companies related to the disaster, BP announced on Friday. The FT reports that Moex Offshore and its affiliates had a 10 per cent interest in the well and were deemed to be liable for a commensurate portion of the costs. BP has so far set aside $41bn for the accident. The settlement excludes punitive damages – which BP does not believe will be payable – and fines, the company said in a statement. The agreement is not an admission of liability by any party regarding the accident, BP added. Read more
BP’s earnings fell in the first quarter from a year earlier after it sold assets to pay for repercussions from the Gulf of Mexico oil spill, the New York Times reports. The company also booked an extra $400m charge related to last year’s Gulf of Mexico spill. Excluding one-time items and inventory changes, earnings fell to $5.37bn from $5.6bn a year earlier, even despite higher oil prices. According to Bloomberg, BP was expected to earn $5.6bn. Production at the oil major dropped 11 per cent after the sale of more than $24bn of assets to help pay for the disaster. According to the New York Times, BP has now set aside $41bn to cover costs related to the oil spill in the Gulf of Mexico, one of the largest ever and is still trying to get regulatory approval to resume drilling in the Gulf of Mexico. Read more
BP has filed a $40bn law suit against Transocean, accusing the offshore rig company of negligence and causing the Deepwater Horizon drilling rig in the Gulf of Mexico to be “unseaworthy,” according to the FT. Another suit blames Cameron International for making a ‘flawed’ blow-out preventer on the well. Transocean said BP’s action was ‘specious and unconscionable’. Wednesday marked the final day for suits to be filed, with litigation key to deciding who must pay compensation to federal and local governments for spill costs, the WSJ says. A Norwegian risk management company has previously found design flaws in the blow-out preventer in one investigation, although several other inquiries have blamed BP. Read more
BP filed a $40bn suit against Transocean in New Orleans on Wednesday, reports Reuters. The British oil giant is seeking damages and other costs from the owner of the Deepwater Horizon rig. It also sued Cameron International Corp, saying a blowout preventer made by the firm failed to avert the disaster in the Gulf of Mexico. Read more
BP will resume drilling in the Gulf of Mexico as early as July, less than 15 months after an accident that killed 11 workers and led to the worst offshore oil disaster in US waters, reports the FT. The UK oil group has struck a deal with US regulators, under which it will be allowed to drill 10 existing wells that were under way before the accident and which it needs in order to maintain or increase production on existing platforms. In exchange for permission to resume drilling, which means BP can restart just weeks after other groups, including Chevron, were given consent, the UK group has agreed to 24-hour access to government overseers and has detailed emergency contingency plans. What seems clear, says the New York Times, is that the gulf “will not return to full production until all major players resume drilling”. Read more
BP will resume drilling in the Gulf of Mexico as early as July, nearly 15 months after an accident that killed 11 workers and led to the worst offshore oil disaster in US waters, reports the FT. The UK oil group has struck a deal with US regulators, allowing it to drill 10 existing wells which it needs in order to maintain or increase production on existing platforms. In exchange for permission to resume drilling, which means BP can restart just weeks after other groups, including Chevron, were given consent, the UK group has agreed to 24-hour access to government overseers and has detailed emergency contingency plans. Environmental groups however reacted with dismay to the decision. What seems clear, says the NYT, is that the gulf “will not return to full production until all major players resume drilling”. Read more
Federal prosecutors are reviewing whether to bring manslaughter charges against BP managers for decisions taken before the Gulf of Mexico oil well explosion and spill, sources have told Bloomberg. A further line of inquiry focuses on whether the company executives’ congressional testimony last year conflicted with what they knew of problems at the Macondo well. Individual charges would significantly alter the balance of environmental safety penalties that BP may face. Investigators are considering charges of involuntary manslaughter or seaman’s manslaughter, sources added. Read more
BP’s Macondo well continued to spill oil into the Gulf of Mexico after the Deep water Horizon rig explosion last year because a piece of pipe was wedged in the valves that were supposed to shut it off, an investigation into the accident has found. The FT reports that the blow-out preventer, the stack of valves on the sea bed intended to prevent escapes of oil and gas, failed to close properly because a section of drill pipe had buckled inside the well, obstructing the “rams” deployed to seal it, according to Det Norske Veritas, a consultancy hired by the US interior department. The WSJ adds that the investigation concludes that the blowout preventer failed as a result of a design flaw, not because of misuse by BP or any of the other companies involved. In fact, they write, BP came within 1.4 inches or less of preventing the worst offshore oil spill in U.S. history. DNV’s conclusions could now see Cameron International, the US engineering group that manufactured the BOP, more deeply embroiled in the ongoing compensation case. Read more
Here’s a big table for institutional investors to pore over on Tuesday:
BP has put its troubled Texas City refinery up for sale as part of a wholesale shake-up of its US refining and marketing business that will see the UK oil group divest half of its refining capacity in the country, the FT reports. The company also reported its first loss in almost twenty years, of $4.9bn, after pre-tax charges relating to last year’s Gulf of Mexico oil spill. Profits rose 30 per cent over the fourth quarter, the WSJ says, although the FT points out that BP’s underlying replacement cost profit, which strips out changes in oil and gas inventory, and excluding exceptionals, for the fourth quarter, was $4.4bn, below analyst expectations of $4.9bn. Read more
BP just can’t keep out of the news these days.
After hitting the Gulf coast with its Macondo well oil spill last year, the oil major as of Saturday was seemingly involved in another major oil-infrastructure fail — the shutdown of its Trans-Alaska pipeline system due to a leak. Read more
The US government’s announcement on Wednesday of its civil case against BP over the Gulf of Mexico oil spill is a reminder of what has been clear from the start: the final impact of the disaster will be decided in the courts, the FT reports. BP has already set aside $39.9bn before tax to cover the costs of the spill. If it is found to have been grossly negligent in the actions that led to the explosion on the Deepwater Horizon rig on April 20, it could face additional penalties of $21bn or more. In other energy news, the FT reports that US recoverable reserves of natural gas are much larger than previously estimated, the government’s Energy Information Administration has said, suggesting higher production can be sustained at lower prices than it expected a year ago. In the first release from its Annual Energy Outlook for 2011, the EIA more than doubled its central estimate of the country’s technically recoverable reserves of shale gas, from 353,000bn cubic feet to 827,000bn cubic feet. The estimate would be enough to cover the entire gas consumption of the US for 36 years. Read more
BP’s asset disposals have topped the $20bn mark after the UK oil group agreed to sell its interest in Argentina’s Pan American Energy for $7.06bn to its joint venture partner, the FT reports. The sale, announced on Sunday, means BP has now raised about $21bn from disposals – close to the $30bn target it revealed earlier this year to help pay for the Gulf of Mexico spill. BP agreed to set up a $20bn fund to help pay for claims from the April 20 accident. Under the agreement, BP will sell its 60 per cent stake in Pan American Energy to its joint venture partner Bridas Corporation, which is co-owned by Bridas Energy Holdings of Argentina and China National Offshore Oil Corporation. The Chinese oil and gas group spent $3.1bn on the stake in March this year, marking its entry into Latin America. Meanwhile the New York Times reports that BP has said it is to commission a feature-length film about the Deepwater Horizon oil spill. Read more
The White House will immediately end a moratorium on deepwater oil and gas drilling put in place after the Gulf of Mexico oil spill earlier this year, the NYT reports. Regulatory changes since then are intended to make the resumption of drilling much safer than before the accident on a BP well caused the worst environmental disaster in US history. Weeks or even months may go by before companies can win new permits to drill, Reuters reports. At least one American company is making other offshore plans in the meantime, according to the FT. Google will make a significant move beyond its core internet search business by working with Japan’s Marubeni Corporation to finance a $5bn project to build windpower capacity off America’s Mid-Atlantic shores. Read more
The Macondo well is effectively dead — marking an ‘important milestone’ in the response to the Gulf oil spill, according to President Obama, reports the FT. The announcement ends the 5m barrel leak, which sparked fury among the US public and politicians. BP may not attain closure just yet, though. It’s confirmed that payouts from its $20bn Gulf compensation fund have soared since independent administrators took over, Reuters reports, while it faces a fight to resurrect deepwater drilling off American shores for a good while yet, Bloomberg says. Read more
The US on Sunday pronounced BP’s blown-out Macondo well in the Gulf of Mexico “effectively dead”, 152 days after the explosion on the Deepwater Horizon rig that caused the world’s largest offshore oil spill, reports the FT. The announcement officially ends the 5m barrel leak but may eventually be seen to have had only a marginal effect on the global energy industry. President Barack Obama described the news as “an important milestone… the final termination” but added it would “not be easy” for the Gulf of Mexico region to recover fully from the disaster. The NYT adds that oversight for the well would pass from the National Incident Command to the Department of the Interior and that the Macondo well and two relief wells would be abandoned following standard industry practices. Read more
The US government is requiring oil and gas companies in the Gulf of Mexico to promptly set permanent plugs in nearly 3,500 non-producing wells, reports the FT. Under the new rules announced on Wednesday, the companies also must dismantle about 650 oil and gas production platforms if they are no longer being used for exploration or production. Until now, these companies waited sometimes years after the infrastructure had been out of use to properly seal and dismantle their equipment. But the Interior Department is mandating that any well that has not been used during the past five years for exploration or production must be plugged and associated equipment must be decommissioned if no longer involved with exploration or production Read more
The incoming boss of BP has been striking a confident tone in recent meetings with City analysts, reports FT Alphaville. The message that Bob Dudley has been keen to convey is that BP is financially sound, the provisions made against the costs of dealing with the aftermath of the Macondo spill should cover the liabilities, and the $30bn disposal programme is going well, according to analysts. And while BP has not made any decision on the optimal size or shape of the business going forward, there is an acknowledgement that it has to change. Read more
BP’s internal inquiry into the causes of the disastrous Gulf of Mexico oil spill provoked an immediate backlash from its contractors, as well as US politicians who said the British group was “happy to slice up blame, as long as it gets the smallest piece”, the FT reports. BP identified a sequence of failures’ in the report, acknowledging faults by its engineers but also shifting blame onto Transocean, the well owner, and Halliburton, which cemented the well. BP’s division of responsibility was “self-serving”, Transocean countered, while Halliburton claimed inaccuracies in the report. FT Alphaville has charts and timelines from the report. Read more
BP has published its internal investigation report into the Deepwater Horizon rig disaster in the Gulf of Mexico on 20 April 2010.
The conclusion? Read more
BP said on Friday that the cost of responding to its Gulf of Mexico oil spill had risen by almost $2bn over the past month to about $8bn, reports the FT. The UK oil and gas group also said that it was in the process of replacing the blow-out preventer that had failed when the leak from the Macondo well began in April. The well was plugged by a “static kill” operation in August. BP added that the relief well that is being drilled as a final corrective measure was expected to intercept the Macondo well in mid-September, weather conditions permitting. Read more
BP agreed on Thursday to pay a record $50.6m fine for continued safety violations at its Texas City refinery five years after an explosion there killed 15 and injured 170, reports the FT. The fine came as US officials on Thursday said the UK oil group might not need to finish drilling the relief well touted as the permanent solution to the Gulf of Mexico oil spill. BP has for months been drilling two relief wells to completely seal off the Macondo well, which spewed oil into the gulf for almost three months until it was capped on July 15. The NYT times adds that the Texas fine reflects what critics have said is a “corporate culture that has emphasised speed and profits over safety”. Read more