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BP Oil Spill Costs Rise Again, Up to $40 Billion

Source: London Evening Standard

Posted on 02 Nov 2010

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BP returned to profit in the third quarter but stated that it has spent an extra $7.7 billion on the Gulf of Mexico oil spill, sending its total bill so far for the disaster close to $40 billion.

The oil giant blamed the spiralling cost of the clean-up operation on the delay in sealing the ruptured Macondo well. In July, it put aside $32.2 billion for the clean-up, but the leak wasn't shut off until mid-September.

BP said it had also spent more on decontaminating and demobilizing the vessels it sent out to the spill, with higher lawyer fees and a bigger-than-expected bill for running its claims centre also contributing to the company's $7.7 billion spend in the three months to October.

The firm refused to say if its spill bill would rise above $40 billion. Finance director Byron Grote said: “None of us has a crystal ball. This is the best estimate we can make right now.”

However, strong oil and gas prices over the third quarter meant BP still managed to post a $1.8 billion profit, reversing its record loss of $17 billion in the previous three months, when it faced the immediate impact of the Deepwater Horizon oil disaster.

“These results demonstrate that BP is well on track for recovery,” said chief executive Bob Dudley at the company's office in St James's today. The American was reporting his first financial results since taking over from Tony Hayward at the height of the oil spill crisis.

Dudley said: “The last six months have been a traumatic period for BP. What I can report today is that BP is now in recovery mode. The strong operating results we have announced this morning demonstrate progress. We are meeting the costs of our commitments in the Gulf of Mexico.

“We know that we have a long road ahead of us in order to earn back trust in BP. We are making significant changes to our organisation as a result of this disaster.

“On this basis, I am confident we will emerge strengthened from what has been a traumatic experience.”
Stripping out the cost of the disaster, higher crude prices meant that BP's operating profit for the quarter was 18% higher than the same time last year, at $5.5 billion.