Cost to BP of oil spill could reach $10bn

BP SAYS it has spent $350 million so far on trying to contain its oil spill in the Gulf of Mexico, raising the prospect that the cost of the clean-up alone could exceed $1 billion.

Along with the other companies involved in the April 20th Deepwater Horizon disaster, BP’s US president will come under heavy questioning during congressional hearings that start today about the companies’ safety records and their preparedness for such a spill.

One BP insider said: “Everybody is braced for a pretty challenging session.”

Analysts have suggested the total bill for the slick could come to $10 billion (€8 billion) for BP, including compensation claims for lost earnings from the fishing and tourist industries of the region, as well as punitive damages.

BP has described its response to the leak as “massive overkill”, deploying what it claims are enough resources to control a release of oil many times greater than the 5,000 barrels a day believed to be leaking into the Gulf. Its efforts however have been insufficient to stop small quantities appearing on the coasts of Louisiana and Alabama.

The operation to control the leak at the seabed in 1,525 metres of water have been improvised as the incident has developed because there is no precedent for a spill at such a depth.

BP’s shares fell 1 per cent yesterday as most other shares rose. They have now dropped by about 15 per cent since the explosion, cutting BP’s market capitalisation by about $27 billion. – Copyright The Financial Times Limited 2010