Transocean to pay $1.4bn for role in BP oil spill

4 January 2013
By Sofia Mitra-Thakur
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Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon

Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon

Transocean agreed to pay $1.4bn to settle US government charges over BP's massive Gulf of Mexico oil spill in 2010 and the rig contractor admitted that its crew on the Deepwater Horizon was partly responsible.

Transocean, which employed nine of the 11 workers killed in the accident, had set aside $1.5bn for the US Department of Justice out of a $1.95bn Macondo loss provision. 

The settlement, unveiled this week by the DoJ, includes $1bn in civil penalties and $400m in criminal penalties.

Still looming is a settlement with the plaintiffs committee that represents more than 100,000 individuals and business owners claiming economic and medical damages. 

The ultimate cost of Macondo to Transocean could end up being more than $4bn, UBS analyst Angie Sedita said. 

Last year, BP reached a $7.8bn plaintiffs liability settlement.

"The bottom line to me is they now can put away the big black cloud that has been hanging over them," said Phil Weiss, an oil analyst at Argus Research.

BP and its contractors have sought to push blame on to each other since the 2010 well explosion caused the largest-ever US offshore oil spill. 

Lawyers and analysts see the federal settlements with BP, and now Transocean, as a solid legal framework to start putting the disaster behind them.

Halliburton, which performed cementing work on the Macondo well, remains the only one not to have settled. 

Daniel Becnel, a Louisiana lawyer representing spill-related claimants, believes that settlement is merely a matter of time because none of the three really wants to fight it out in court.

The BP-contracted Deepwater Horizon was drilling the mile-deep well on 20 April 2010, when a surge of methane gas caused a blowout. 

The accident led to a month-long US deepwater ban and intense scrutiny of the offshore drilling industry, which is now booming worldwide despite lingering public concerns.

Of the $400m in Transocean criminal fines, $150m will help protect the Gulf of Mexico, while another $150m will fund spill prevention and response efforts there, the DoJ said. 

Transocean must also implement court-enforceable measures to improve safety and emergency response on US rigs.

"From what I have read, they (Transocean) played a part, but BP is the lion's share and ought to pay $15bn," said Tony Kennon, mayor of Orange Beach, Alabama.

The US Chemical Safety Board found that BP and Transocean both had "safety management system deficiencies that contributed to the Macondo incident", and neither had adequate safety rules.

The DoJ said that in agreeing to plead guilty to violating the Clean Water Act, Transocean admitted that members of its crew, acting at BP's direction, were negligent in failing fully to investigate indications that the Macondo well was not secure.

"Unfortunately, Halliburton continues to deny its significant role in the accident, including its failure to adequately cement and monitor the well," BP said in a statement.

Halliburton said it had substantial legal arguments against any liability, including an indemnity in its contract with BP.

BP agreed in November to a DoJ settlement of its own worth $4.5bn, including the largest criminal fine ever at $1.256bn.

The London-based oil company also agreed to plead guilty to obstruction of Congress, a felony.

Attention now turns to any possible settlements ahead of a Macondo-related trial due to start on 25 February in New Orleans, including for Clean Water Act (CWA) violations that may cost BP $21bn if it is found grossly negligent.

"That's where fairness will be found – or lost," National Audubon Society CEO David Yarnold said of BP's CWA case, since most of the fines would go toward restoring the Gulf of Mexico.

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