Wednesday 5 October 2022

Transocean to pay $1.4bn for role in BP oil spill

Washington, January 4, 2013

Transocean agreed to pay $1.4 billion to settle U.S. government charges over BP's massive Gulf of Mexico oil spill in 2010 and the rig contractor admitted that its crew on the Deepwater Horizon was partly responsible.

Transocean, which employed nine of the 11 workers killed in the accident, had set aside $1.5 billion for the U.S. Department of Justice out of a $1.95 billion Macondo loss provision. The settlement, unveiled on Thursday by the DoJ, includes $1 billion in civil penalties and $400 million in criminal penalties.

Still looming is a settlement with the plaintiffs committee that represents more than 100,000 individuals and business owners claiming economic and medical damages. So the ultimate cost of Macondo to Transocean could end up being more than $4 billion, UBS analyst Angie Sedita said. Last year, BP reached a $7.8 billion plaintiffs liability settlement.

The shares of Switzerland-based Transocean rose 6.4 percent to close at $49.21 in New York on the lower-than-expected DoJ payout, with Barclays having expected a settlement of $2.5 billion. The cost of insuring Transocean debt fell sharply.

"The bottom line to me is they now can put away the big black cloud that has been hanging over them," said Phil Weiss, an oil analyst at Argus Research.

BP and its contractors have sought to push blame on to each other since the 2010 well explosion caused the largest-ever U.S. offshore oil spill. Lawyers and analysts see the federal settlements with BP, and now Transocean, as a solid legal framework to start putting the disaster behind them.

Halliburton Co, which performed cementing work on the Macondo well, remains the only one not to have settled. Daniel Becnel, a Louisiana lawyer representing spill-related claimants, believes that settlement is merely a matter of time because none of the three really wants to fight it out in court.

The BP-contracted Deepwater Horizon was drilling the mile-deep well on April 20, 2010, when a surge of methane gas caused a blowout. The accident led to a months-long U.S. deepwater ban and intense scrutiny of the offshore drilling industry, which is now booming worldwide despite lingering public concerns.

Of the $400 million in Transocean criminal fines, $150 million will help protect the Gulf of Mexico, while another $150 million will fund spill prevention and response efforts there, the DoJ said. Transocean must also implement court-enforceable measures to improve safety and emergency response on U.S. rigs.

"From what I have read, they (Transocean) played a part, but BP is the lion's share and ought to pay $15 billion dollars." said Tony Kennon, mayor of Orange Beach, Alabama.

The U.S. Chemical Safety Board found that BP and Transocean both had "safety management system deficiencies that contributed to the Macondo incident," and neither had adequate safety rules.

The DoJ said that in agreeing to plead guilty to violating the Clean Water Act, Transocean admitted that members of its crew, acting at BP's direction, were negligent in failing fully to investigate indications that the Macondo well was not secure.

"Unfortunately, Halliburton continues to deny its significant role in the accident, including its failure to adequately cement and monitor the well," BP said in a statement.

Halliburton said it had substantial legal arguments against any liability, including an indemnity in its contract with BP. Halliburton shares closed 1.7 percent higher at $36.31.

BP agreed in November to a DoJ settlement of its own worth $4.5 billion, including the largest criminal fine ever at $1.256 billion. The London-based oil company also agreed to plead guilty to obstruction of Congress, a felony.

New York-traded shares of BP closed 2 percent higher on Thursday.

Attention now turns to any possible settlements ahead of a Macondo-related trial due to start on Feb. 25 in New Orleans, including for Clean Water Act (CWA) violations that may cost BP $21 billion if it is found grossly negligent.

"That's where fairness will be found - or lost," National Audubon Society CEO David Yarnold said of BP's CWA case, since most of the fines would go toward restoring the Gulf of Mexico. – Reuters

Tags: BP | Mexico | Washington | 2010 | oil spill | Transocean |


calendarCalendar of Events