B&E’s Steven Philip Warner talks to various global oil & climate experts from the likes of Goldman Sachs, Credit Suisse, Standard & Poor’s, Argus Research, JBC Energy & Varda Group to find out what awaits BP’s fate? Will BP, which as recently as two months back was the second most valued oil major in the world, disappear?
Will BP get smaller, as Bengini forecasts? Only if you call a rise in total asset base from $99.2 billion in FY2009 to $136.4 billion by FY2015 “getting smaller” (forecast by Goldman Sachs). Hayward will not be around by the time this Gulf of Mexico tale becomes the next most remembered disaster (after the 1989 spill of Exxon Valdez tanker in Prince William Sound in Alsaka), but BP will.
Hayward’s agreement with Obama to put aside $20 billion in the escrow account is also being portrayed as an act of helplessness. Quite contrarily, the BP Chief has managed the “two birds with one stone” trick with his submission “on being ordered” by the Senate. One on hand, this act will help mellow down the negative publicity that BP has been earning during the past two months, while on the other, and most importantly, it will ensure a continuation to rights of deep-water exploration in US for the company, a geographical zone from where it derives 34% of its annual supply of crude oil (valued at $78.96 billion as of FY2009).
As far as damages and litigations are concerned, he has two cushions to rest his tired self on, again, unknown to many. BP owns only 65% of the damaged well, under the terms of the ‘Macondo prospect’ contract, and is therefore directly liable for only an equivalent proportion of the damages. Texas-based Anadarko Petroleum has a 25% interest and Japan’s Mitsui owns the remaining 10%. Philip Weiss, Energy Expert of US-based Argus Research tells B&E, “BP is self-insured for its share of the damage.
Under the Oil Pollution Act of 1990 (OPA), there is, however, a $75 million cap on damages. Legislation has been introduced in the Senate to retroactively increase this cap to $10 billion. In short, the government has frequently stated its intent to make all parties associated with the incident pay for the damages and clean-up.” For now, all that BP should worry about is paying-up $75 million; and the $20 billion that it has pledged should more than suffice. And who says Hayward doesn’t know his way to the court? Putting aside all matters pertaining to Hayward & BP, you might just find someone questioning the US Congress for bringing this Gulf of Mexico’s two month-old pirate to the interrogation room, but ignoring the carnage that’s on in a far less-glamorous country in Africa – Nigeria. As per a report by WWF, the World Conservation Union and the Nigerian Conservation Foundation, the amount of oil that has been spilled by oil companies in the Niger Delta since 1960 add up to 540 million gallons – 50 times the Exxon Valdez tanker disaster! In 2009 alone, as per Amnesty International, nine million barrels of oil were spilled in the region.
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Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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