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Deepwater Horizon Update July 22, 2010

BP's fine could hit the billions

  • Under the Clean Water Act BP may be responsible for paying fines up to $4,300 per barrel of oil released into the gulf, totaling $18 billion.
  • The fines take affect if it’s founf that the company was negligent in causing the oil spill
  • Government estimates are as high as more than 4.3 million barrels of oil released since the spill began April 20th.
  • New more accurate flow rates are expected to be determined now that the well cap is in place and collection vessels are in place to collect the oil.

House Passes Bills to Spur New Drilling Technology, Cleaning up Spills

  • One bill passed aims to speed up the use of new ways to limit the damage from oil spills and aid the cleanup. Lawmakers said the booms and skiffs BP is using after the Deepwater Horizon accident in the Gulf of Mexico are the same as units employed in 1989 after the Exxon Valdez tanker crashed off the coast of Alaska.
  • The House also passed a second BP-related bill, to fund research and development for safer oil and gas drilling at the Department of Energy.

Impact of the drilling moratorium

  • It is estimated that between $1.2bn and $7.4bn in output and between 17,000 and 100,000 jobs will be lost by year’s end from the oil spill.
  • The six-month moratorium is expected to account for more than $2.7bn (€2.1bn, £1.8bn) in lost economic activity nationwide, with $2.1bn alone being felt along the gulf coast.
  • Last week, Diamond Offshore Drilling sent its Ocean Confidence rig on the two-month journey to the Republic of Congo under a new contract. Other rig owners are in negotiations to put to work idle equipment that costs about $500,000 a day to run.

BP admits to doctored oil spill photo An image from an oil spill command center showed several monitors with workers carefully watching. The image was altered to include activity on all the monitors. BP admitted to the doctoring of the photo, but said that the photographer made the changes. Altered image above, unaltered image below Admiral Thad Allen in Washington BP Signs North America and Egypt Asset Deals with Apache

  • BP announced yesterday that it has entered into several agreements to sell upstream assets in the United States, Canada and Egypt to Apache Corporation. The deals, together worth a total of $7 billion, comprise BP’s Permian Basin assets in Texas and south-east New Mexico, US; its Western Canadian upstream gas assets; and the Western Desert business concessions and East Badr El-din exploration concession in Egypt.
  • The decision to make these divestments follows the announcement made by BP last month that it was increasing its target for divestments to $10 billion. The proceeds of the sales will be used by BP to increase the cash available to the group.
  • The aggregate proceeds for the deals is $7 billion, subject to customary post-completion price adjustments, such proceeds to be paid in cash. Each sale will take place through a separate agreement between BP and Apache, and none of the sales will be conditional on completion of any of the other sales occurring. Although each of the transactions is subject to certain regulatory approvals (as described in more detail below), it is expected that they will all be completed during the third quarter of 2010.
  • The aggregate replacement cost profit (before interest and taxation) attributable to the assets to be sold in these deals for the year ended 31 December 2009 was US$166 million.