BP and Anadarko reach settlement over Gulf of Mexico oil spill

Anadarko's payment to BP is intended to settle all of BP's current and future claims in relation to the April 2010 explosion on its Deepwater Horizon rig. The settlement also ends related arbitration proceedings between the two companies.

The payment will be used as part of a $20bn trust fund set up by BP to compensate victims and meet the cost of damage to natural resources, BP said.

Deepwater Horizon, owned and operated by Transocean, was drilling on behalf of BP in the Macondo oil field south-east of Louisiana when the accident happened. The sunken rig caused the biggest oil spill in US history and killed 11 workers.

Official investigations found the accident was the result of multiple causes involving multiple parties, BP said. At the time, Anadarko held a 25% interest in the Macondo oil field. BP has so far recorded total estimated costs of $40bn in relation to the event, and has invoiced Anadarko a total of $6.1bn for what it considers to be the company's 25% proportionate share of the costs.

Both parties stressed that the settlement agreement was not an admission of liability.

Earlier this year the court in Louisiana enforced an arbitration clause in the joint operating agreement between BP and Anadarko, after Anadarko claimed that BP had waived its right to arbitrate by defending its lawsuit in court.

In a short ruling (6-page / 104KB PDF), Judge Barbier said that Anadarko had failed to overturn the "strong presumption" in favour of arbitration as BP had not "substantially invoked" the judicial process in defending Anadarko's actions.

Construction law expert Mark Roe of Pinsent Masons, the law firm behind Out-Law.com, said that it made "good business sense" for the two companies to have resolved the issues without going through arbitration proceedings.

"No doubt there will be further claims between BP and its contractors at the site. I am sure all parties would prefer that matters be settled now, rather than being subject to media scrutiny in the US courts," he said.

He added that although the use of arbitration agreements in international energy contracts was "normal", the confidentiality of the process gave companies using arbitration an advantage over those litigating in the courts.

As part of the settlement agreement BP will cancel its claims against Anadarko as well as forgoing reimbursement for any future costs arising from the incident, Anadarko said in a statement. BP will also fully indemnify Anadarko against any further claims which may arise under their joint operating agreement.

Anadarko said that it would no longer pursue its allegations of gross negligence against BP, and will transfer its 25% interest in the oil field to BP.

Anadarko chairman Jim Hackett said that the settlement removed "significant uncertainty regarding future liabilities and associated risks".

"Though the agreement does not provide indemnification against fines and penalties, punitive damages or certain other potential claims, we do not consider these items to represent a significant financial risk to Anadarko. This confidence stems from recent court decisions that released Anadarko from punitive damages and personal injury claims, combined with the findings of various investigations that have confirmed the company had no direct involvement in the drilling of the Macondo well," he said.

Bob Dudley, BP's chief executive, agreed that the settlement was a "positive resolution" of the uncertainty surrounding who was responsible for compensating the victims of the disaster.

"There is clear progress with parties stepping forward to meet their obligations and help fund the economic and environmental restoration of the Gulf. It's time for the contractors, including Transocean and Haliburton, to do the same," Dudley said.

BP previously announced settlements with MOEX, which had a 10% interest in the well at the time of the explosion, and Weatherford, which provided the drilling equipment.

Reporting a profit of $5.14bn for the three months to September 2011, Dudley said that BP had reached a "definite turning point" after the disaster.

He added that oil production over the period had fallen by 12% from the same period in the previous year due to the suspension of production in the Gulf of Mexico.