BP seeks $15bn spill settlement

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BP is hoping to reach a settlement with the US authorities in which it would pay less than $15bn to resolve all criminal and civil penalties and damages arising from the 2010 Deepwater Horizon disaster , according to a person familiar with the discussions.

That figure is substantially less than the $25bn the Department of Justice is seeking from BP, the person said, adding that negotiations were accelerating. An agreement could be reached before the Democratic party’s convention in September.

BP and the DoJ declined to comment.

Efforts by Bob Dudley, BP chief executive, to rebuild the company have been hampered by lingering uncertainty over the scale of the final bill for the Gulf of Mexico disaster, which killed 11 men and caused the world’s largest offshore oil spill.

Mr Dudley is simultaneously attempting to manage an exit from the company’s Russian joint-venture , TNK-BP, after years of feuding with its domestic partner, Alfa-Access-Renova. BP’s 50 per cent stake in the venture is valued at up to $30bn.

BP has already set aside $37.2bn for the costs of the spill. This includes just $3.5bn for penalties under the Clean Water Act, which could potentially be significantly higher.

Those penalties could be more than $17.5bn if BP is judged to have acted with gross negligence – a charge the company has always denied. Authorities are also seeking damages for the cost of restoring the Gulf coastline.

Last month, BP received preliminary approval from a court in New Orleans for its proposed settlement with individuals and businesses affected by the spill, which the company estimates will cost $7.8bn. Judge Carl Barbier, who has been hearing the civil case, set a date of November 8 for a “fairness hearing” to give final approval to the settlement.

The company, however, still faces civil claims from US federal, state and local governments for penalties that could run into the tens of billions of dollars.

The DoJ is also conducting a separate investigation of BP for possible criminal charges. The US government filed the first such charges in April in connection with the disaster, when it accused a former BP engineer of obstructing justice by allegedly deleting text messages about the volume of oil flowing from the well.

In its settlement with the DoJ, BP would seek to resolve both civil and criminal actions. The person familiar with the matter said BP “doesn’t want it to be like OJ Simpson, where you’re acquitted in one trial and then found [liable] in another”.

Legal experts consider a settlement is the most likely outcome, taking away the risks of going to trial for both BP and the US authorities.

A $15bn deal would disappoint many people in the Gulf region, where much larger figures have been discussed. Residents and politicians want any money paid by BP to be spent in the region, hoping that it will revive the economy.

If a settlement is not reached by late summer, the negotiations could drag on until a trial deadline set for January 14. The US federal government and Gulf Coast states had wanted a trial addressing the civil charges against BP to begin by the summer.

BP’s share price is still a third below pre-spill levels – partly due to a lack of clarity about the scale of the potential damages and penalties the company might face.