Will BP’s Partners Cough up $400 Million?
As the clean-up cost for BP’s spill surpasses $3 billion, BP has demanded that its partners to pay about thirteen per cent of the costs so far or $400m.
The demands were sent to Deepwater Horizon partners Anadarko – that owns 25 per cent of the well – and Japan’s Mitsui Oil Exploration that owns ten per cent.
It is believed that the companies have roughly until the weekend to pay up.
But what is BP going to do if its partners refuse to pay up? Anadarko still refuses to accept blame for the disaster, saying BP’s actions could amount to “gross negligence or wilful misconduct”.
The prospect of BP’s partners fighting in courts over who to blame for the disaster would be an intriguing spectacle for the thousands of plaintiffs stacking up against the company. So far nearly 95,000 claims for compensation have been submitted, with the company processing 47,000 payments.
If the battle over the $400 million goes to the courts it could lead to bitter recriminations between the partners.
Longer-term it could open up a thorny question of the cross-financing of deep water drilling. “Sleeping partners” on oil drilling rigs were meant to help spread the financial and technical risk involved in drilling, with the operator taking day to day decisions.
But since Deepwater Horizon, there will be many in the industry who will be re-evaluating this relationship and the risks involved in being a “sleeping partner”.
What happens, for example, when the operator acted in a reckless way as BP apparently did, on this occasion?
What happens if they also get sued? BP may be able to (just) afford the legal, financial and clean up costs, but the further their partners get dragged into helping cough up the cash, the more they will be unwilling or unable to partner BP next time.
And given that BP is leading the deep offshore industry, if it runs out of prospective partners then it will not be able to afford to drill deeper.
This could have real knock on consequences for the deep offshore industry.