Mitsui deal fuels hope of BP settlement on Gulf spill

BP investors took heart yesterday after one of its Gulf of Mexico drilling partners agreed a $90m (£57m) settlement with the US government over the fatal disaster there, fuelling hopes the oil giant will do the same, and at a sharply lower cost than previously expected.

The Macondo lawsuit is scheduled to start next week but news that Mitsui of Japan, which owned a 10 per cent stake in the well that exploded in April 2010, has become the first company to settle with US authorities saw City analysts suggest BP could do the same.

The terms of Mitsui's $90m Clean Water Act penalty mean BP could pay as little as $900m for its own damage, almost a quarter of what it had put aside. The Japanese firm's fine works out at about $175 for each barrel of the 4 million barrels of oil spilt, sharply lower than the potential maximum of $4,300 per barrel leaked into the Gulf.

"This shows the Department of Justice's willingness to settle the case and implies that the potential Clean Water Act liability could be settled at $900m, well below the $3.5bn BP has provisioned for," Alejandro Demichelis, an oil analyst at Bank of America Merrill Lynch, said.

"That said, [subsidiary] Moex's position as minority partner could be seen differently from BP's as operator."

With the Macondo trial due to start next Monday, Mr Demichelis added that this week "will likely be critical for BP". He added: "Ideally, and considering the Moex deal, we should see progress on potential settlements with the different parties involved. This includes contractors, Department of Justice and other plaintiffs."

Earlier this month, Bob Dudley, BP's chief executive, said: "We are prepared to settle if we can do so on fair and reasonable terms. But equally, if this is not possible, we are preparing vigorously for trial."

Next week's lawsuit is the first of two major cases BP is fighting in the US. It will determine the level of fines and pollution violations that BP and its co-defendants Transocean and Halliburton will have to pay. A second is by US investors who claim that BP misled shareholders over its ability to deal with the after-effects of an oil spill.

Shares in BP rose 10.3p to 499.25p.