BP Eyes Expansion While Settling Deepwater Disaster
Exxon Mobil (NYSE:XOM) is reportedly engaged in talks with oil majors about the sale of its stake in the West Qurna-1 oilfield in Iraq. The company is trying to pull away from the project in favor of more lucrative prospects in Kurdistan. Exxon has a large stake in the $50 billion project, meaning that any interested parties must have massive financial and operational scale, narrowing the list of possible buyers.
British Petroleum (NYSE:BP), Royal Dutch Shell (NYSE:RDSA)(NYSE:RDSB), and Russia’s second-largest producer of crude oil LUKOIL will examine the deal. Iraqi officials may find themselves forced to sweeten the terms of the contract in order to lure in oil majors who may be able to turn elsewhere for easier profits. Iraq has set a goal of increasing oil production from 3.4 million barrels per day to as much as 6 million barrels per day by 2015.
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Meanwhile, a long-awaited fairness hearing for $7.8 billion in partial settlement claims related to the 2010 Gulf of Mexico oil spill has begun in New Orleans. United States District Judge Carl Barbier, who granted preliminary approval to the deal earlier in may, is hearing arguments on the proposed settlement. BP and lawyers representing some 100,000 damage claims are urging Judge Barbier to approve the settlement, while attorneys representing at least 13,000 plaintiffs claim the settlement is unfair.
The damages that BP and Transocean (NYSE:RIG), which owned the Deepwater Horizon rig, face are substantial and multifaceted. The proposal under review is meant to partially settle private claims for economic loss and physical injuries related to the spill or clean up.
What is most contested is the way that damages are being distributed. Representatives of several groups claim that damages are being awarded in a haphazard and nonsensical way. Identical businesses in close proximity are being arbitrarily awarded different amounts of money, while there are a number of victims claiming their damages are not addressed at all.
BP has already paid more than $8 billion in damages so far, and on top of the pending settlement faces as much as $17 billion in penalties from the U.S. government under the Clean Water Act. The issue under contention in that case is whether or not BP was negligent in its duties and operation of the site, or if it was simply an unavoidable disaster.
While oil majors are perpetually involved in litigation, BP has been king of lawsuit mountain ever since the disaster in 2010. While the Deepwater Horizon spill is the crown, the company has been paying millions to settle a number of other claims around the world. BP’s history of lawsuits could play a major role in how evidence is weighed and judgments are made against it by the government.
At the end of October, BP’s subsidiary in Alaska was ordered to pay the state government $255 million in damages for two oil spills in 2006. Alaskan officials ruled that BP was negligent in performing repairs and maintenance on two pipelines, and preventable erosion led to the spills. A reputation for carelessness won’t play favorably for the company.