BP investors count the cost of US legal action

Investor confidence in BP wobbled yesterday after the US government launched a legal challenge claiming unlimited liabilities for the Gulf of Mexico oil spill, sending the company's stock down by nearly 1.4 per cent.

BP and eight other companies,including Anadarko and Transocean, will be sued under the US Clean Water and Oil Pollution Act to determine how much they must pay for the Deepwater Horizon disaster in April, which claimed 11 lives and caused the biggest oil spill in history.

BP downplayed the implications of the lawsuit yesterday, stressing it is part of the expected process in the aftermath of the slick and was always factored into the company's financial plans. But the size of the fine remains unclear, potentially spiralling as high as $21bn (£13bn) if the companies are found guilty of gross negligence.

The legislation specifies fines ofeither £1,100 per leaked barrel, or £4,300 per barrel if the companies are found grossly negligent. But the issue of negligence remains unresolved. BP's own internal report – published by group head of safety Mark Bly in September – determined that the explosion at Macondo was caused by "asequence of failures" arising from "a complex and interlinked series ofmechanical failures, human judgements, engineering design, operational implementation and team interfaces".

The Presidential Commission also appears to be erring in the oil giant's favour, with last month's preliminary report concluding that BP had not put cost before safety, and chief investigator Fred Bartlit saying he agreed with 90 per cent of the Bly report.

But it is the conclusions of theDepartment of Justice investigation, currently under way, which will inform the civil case. The Marine Board and the Chemical Safety Board are also conducting analyses of the event.

There is disagreement over the size of the spill itself. The most recent estimates from the government put the total at 4.9 million barrels. But the figure is disputed by BP, with someinsiders suggesting the final figure to be not much more than half of the government estimate. While the worst-case scenario could see a total fine of $21bn, if the companies are held to be liable but not negligent the fine drops to $5.4bn.

BP has already made considerable provision for the financial impact of the Deepwater Horizon disaster. The group has estimated total costs of up to $40bn, of which $20bn is to meet damages claims from individuals pursued through the compensation process run by Kenneth Feinberg, and another $11bn has already been paid out to cover the operational clean-up costs. Some $9bn therefore remains to cover any fines levied.

The provisions are supported by a $30bn divestment programme launched earlier in the year. So far, BP has raised around $24bn through a string of disposals, most recently the $775m sale of its exploration and production business in Pakistan, earlier this week.

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