BP oil spill costs surge to $40-billion

British energy giant BP announced a return to profit on Tuesday but revealed new shock estimates for the cost of its Gulf of Mexico oil spill, putting the expected bill at close to $40-billion.

The new figure is far higher than expected.

BP said it had taken an additional charge of $7,7-billion during the third quarter, bringing the company’s own total estimated clean-up and legal costs to $39,9-billion.

The company also reported a net profit of $1,78-billion for the third quarter following a loss of $16,9-billion during the second quarter of this year.

“BP announced today [Tuesday] that a strong operating performance across the group helped it return to profit in the third quarter of 2010 despite an additional pre-tax charge of $7,7-billion in respect of the Gulf of Mexico spill,” the company said in a statement.

The Gulf of Mexico oil disaster was triggered by a blast on the Deepwater Horizon rig — leased by BP and operated by Transocean Energy — that killed 11 workers on April 20.

The broken well was eventually plugged, but not before it gushed about 4,9-million barrels of oil into the Gulf waters. The spill destroyed hundreds of kilometres of fragile coastlines and caused BP’s share price to collapse.

It also forced the resignation of chief executive Tony Hayward and BP to announce that it was selling assets worth up to $30-billion.

‘Good progress’
BP’s new chief executive, Bob Dudley, said the latest earnings results showed the company was “well on track for recovery”.

“We have made good progress during the quarter. This strong operating performance shows the determination of everyone at BP to move the company forward and rebuild confidence after the terrible events of the past six months,” Dudley said in the statement. “We have also begun to make important changes in the way we operate across the group … to ensure that safety and risk management are embedded as the absolute priority for every operation, for every person, throughout BP.”

Dudley last week insisted that BP would not quit the United States over the disaster that he said had “threatened the very existence” of the company.

US authorities have severely criticised BP over its handling of the disaster, while the company is currently defending itself against tens of billions of dollars in potential US fines and legal liabilities.

BP said on Tuesday that the additional pre-tax charge of $7,7-billion was mainly the result of increased costs for responding to the spill. — AFP

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Ben Perry
Ben Perry works from UK. Financial journalist @AFP, tweets mostly a mix of finance and football Ben Perry has over 226 followers on Twitter.

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