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Anadarko Says BP Should Pay After Being Reckless

Source: Bloomberg 6/19/2010, Location: North America

Anadarko Petroleum Corp., the Texas oil company that owns 25 percent of the damaged well pouring crude into the Gulf of Mexico, said BP Plc, the project’s operator, should pay the costs from the spill because it acted recklessly and unsafely at the drilling site.

BP didn’t monitor or react to warning signs as the Macondo well was drilled, Chief Executive Officer Jim Hackett said yesterday in a statement. BP is responsible for damages under such conditions, Anadarko said.

“BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement,” Hackett said in the statement.

BP said in a statement that it “strongly disagrees” with Anadarko’s position. Chief Executive Officer Tony Hayward said his company expects other parties that may have responsibility for costs and liabilities to meet their obligations.

“These allegations will neither distract the company’s focus on stopping the leak nor alter our commitment to restore the Gulf Coast,” Hayward said in yesterday’s statement.

Dudley Appointed
The well is gushing as much as 60,000 barrels of oil a day, according to a government estimate. The leak was triggered by an April 20 explosion at a drilling rig leased to BP by Transocean Ltd. Costs of the spill may climb to as much as $50.8 billion if the well is capped at the end of August, according to a June 16 research note from ClearView Energy Partners LLC, a Washington- based policy analysis firm.

BP appointed Robert Dudley, a U.S. citizen, to take charge of cleanup operations related to the spill in the Gulf of Mexico earlier this month. Hayward will remain in charge of the company. Hayward has shown strong leadership “from the very beginning” of the disaster, Dudley said in an interview yesterday at BP’s Washington office.

BP Chairman Carl-Henric Svanberg told Sky News yesterday that Hayward was no longer controlling the day-to-day operations of the cleanup.

Anadarko by yesterday’s market close had plunged 42 percent in New York trading since April 20.

Partners’ Accountability
BP’s partners should be held accountable and should set aside money to pay their share, U.S. Representative Edward Markey said yesterday in an interview for Bloomberg Television’s “Political Capital With Al Hunt.”

BP has announced plans to eliminate its dividend for three quarters, raise $10 billion from asset sales and put $20 billion into a fund to pay claims related to the spill.

Mitsui Oil Exploration Co., which is 70 percent-owned by Japan’s second-biggest trading house, Mitsui & Co., has a 10 percent stake in the well. BP owns 65 percent.

“With regard to the issue of the escrow account, drawing an immediate conclusion about the underlying matters at hand would be premature,” a Mitsui Oil Exploration subsidiary said in a statement.

Co-owners of the project entered into a written agreement that BP would act as the operator and all parties would share the costs based on their ownership interests, including expenses to clean up any spill resulting from drilling, BP said in its statement.

1 Billion Barrels?
The ruptured well may hold as much as 1 billion barrels, the Times reported, citing Rick Mueller, an analyst at Energy Security Analysis in Massachusetts. BP previously estimated the field contained 50 million to 100 million barrels of oil, the U.K. newspaper said.

The Wall Street Journal reported BP used a well design that has been called “risky” by Congressional investigators in more than one out of three of its deepwater wells in the Gulf of Mexico, according to an analysis of federal data. The design was used in the well that exploded, the paper said.

The co-owners also filed documents with the U.S. government certifying that each would be “jointly and severally liable” along with any other responsible parties for oil spill removal costs and damages in accordance with the Oil Pollution Act of 1990, according to BP’s statement.

Anadarko will consider what its remedies may be, John Christiansen, an Anadarko spokesman, said yesterday in an interview. Those options may include not paying BP’s bills or litigation. Anadarko previously said it was reviewing an invoice from BP on spill costs.

Hackett said that Anadarko recognizes it has “obligations under federal law related to the oil spill but will look to BP to continue to pay all legitimate claims as they have repeatedly stated that they will do.”

Increased Risk?
Also yesterday, Moody’s Investors Service said it downgraded Anadarko’s long-term debt rating to non-investment grade, dropping it to Ba1 from Baa3, with further reductions possible.

Hackett, in a telephone interview yesterday, called the decision by Moody’s “premature and unwarranted.” He said Anadarko has a “strong financial position.”

U.S. Representatives Henry Waxman of California and Bart Stupak of Michigan said in a June 14 letter to BP that “time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense.”

If that happened, the lawmakers said, “BP’s carelessness and complacency have inflicted a heavy toll on the Gulf, its inhabitants, and the workers on the rig.”

In a televised address June 15, President Barack Obama vowed he would make BP set aside however much is needed to “compensate the workers and business owners who have been harmed as a result of his company’s recklessness.”

‘Chief Villain’
The extent to which BP is seen as “the chief villain of the entire world helps Anadarko,” said Jeff Rensberger, a professor at the South Texas College of Law. A finding of negligence requires a determination that a party to a contract did something a reasonable person wouldn’t while gross negligence shows more recklessness, he said.

Even if BP is at fault, Rensberger said, Anadarko might still be liable if it’s determined that abnormally hazardous activities occurred at a project in which the company has an interest.

Anadarko also said yesterday that it will donate to Gulf Coast charities or civic agencies any revenue it is entitled to receive from oil recovered in cleanup efforts.

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