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US government plans to take BP to the cleaners over spill
Published on July 15, 2010 by oilprices · 4 CommentsThe US government outlined a plan to take the fourth biggest company in the world, BP, to the cleaners yesterday over the Gulf oil spill, as a US Congressional committee looks to impose a seven year ban for BP on any new US offshore drilling.
Although the latest US plan does not affect BP’s existing US oil wells, if it became law it would be a major blow to BP according to Evgenvy Solovyov, oil equity analyst at SG Securities.
“North America and the Gulf of Mexico are one of the cornerstones of their strategy going forwards,” said Mr Solovyov who estimates that over 10% of BP’s current output comes from the Gulf of Mexico.
Although the proposed ban does not name BP itself, the ban would apply to any company that has experienced 10 or more deaths in the last seven years. This clearly is aimed at oil company BP, so what are the implications for the US and the UK?
Fourth Biggest Company in the World by Turnover – BP
BP is the fourth biggest company in the world by turnover, with a annual income of $246 billion dollars and employs 97,600 people worldwide (source Wikipedia). Only Wal Mart, Exxon and Shell are listed to be larger than BP by turnover.
BP directly employs around 25 percent of it’s workforce in the US, so that’s around 24,000 US jobs at risk if BP went to the wall anytime soon.
Also, from BP’s own perspective, they quote on their company website “BP is the leading producer of oil and natural gas in the United States and the largest investor in US energy development”.
“We have modern refineries in Texas City, TX, Carson, CA, Cherry Point, WA, Whiting, IN and Toledo, OH. These five refineries have a total capacity for processing 1.5 million barrels of crude oil a day.”
“We’re also the second largest gasoline marketer in the US. Our products and services are purchased through 11,700 service stations around the country.”
And the Six Month US Oil Driiling Ban?
Well yesterday, Sen. Mary Landrieu, a Democrat from Louisiana, said that she has urged the Obama administration to drop its new moratorium on deepwater, floating oil rigs because “it could cost more jobs than the spill itself.”
Landrieu, speaking at a US Chamber of Commerce jobs summit, said the moratorium on floating rigs would be particularly damaging because they can be easily moved elsewhere.
The floating rigs are “some of the best rigs in the world, idle at $500,000 a day at a minimum,” Landrieu said. “They’re not going to stay idle until November 30.”
Whilst banning oil companies from deepwater drilling may sound like a reasonable idea for the US government to impose, many predict that oil companies including BP will be severly affected by loss of income, costs to maintain idle rigs and equiptment, the list goes on…
The BP Libya issue & Hilary Clinton
BP has also come under further fire from the US government after secretary of state Hilary Clinton demanded that BP suspend offshore drilling in Libya.
Allegations had surfaced that BP lobbied the UK government to release the UK Lockerbie bomber in 2007.
Clinton responded to reports that BP had lobbied the British government for the release of Abdel Basset al-Megrahi to help it clinch lucrative drilling contracts off the coast of Libya. “I have received the letter and we will obviously look into it,” she said.
How can BP Affect the UK?
BP is the UK’s biggest company by a long way, roughly five times bigger than Tesco and UK taxpayers could end up bailing out BP in the wake of the Gulf of Mexico oil spill disaster.
UK Ministers are concerned about the effect of a BP collapse on British pensioners, whose retirement income relies on the value of the company’s shares as £1 out of every £7 paid out in dividends to British pension pots comes from BP.
No Worries, Exxon Will Come to the Rescue, Right?
Well no, actually Exxon is unlikely to purchase BP, comments Barclay’s Paul Y. Cheng in a note yesterday.
“Unless the Obama Administration is willing to offer assurance in the form of a liability cap, we are skeptical that any CEO will venture into a wholesale takeover of BP at this moment,” the Barclays analyst said in the report.
And that’s not surprising really, as who would even consider investing into, or taking over a company that may face unlimited liabilities for the Gulf oil spill cleanup, together with a heavy handed US administration who seem bent on cutting down or taking away potential future income for troubled BP.
Tags: BP, bp oil spill, company, government, gulf, oil, spill, US
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One shouldn’t rule out sabotage. BP has now had not only its share value diminished but also a lower credit rating by The Wall Street Rats.
One doesn’t have to be too smart to see how Wall Street operates with its short selling strategies. Give a company a bad name, share holders unload their shares and when suficuently low are bought up by rivals. Just watch this development.
American MMS gave their blessing to the drilling. BP leased Halliburton and Transocean techniques. What are their responsibilities?
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Everyone tells us how much they care about the people on the Gulf but the fact is that the only company to fess up to some responsibility and put cash down is BP.
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The US oil lobbies have been bribing US politicians for years, now these hypocrites turn on BP in order to gobble up the assets.
We are all wasteful inconsiderate and greedy as well We are all resposnible but the US with the greatest appetitie for fuel and having started multiple wars in order to control the worlds energy supplies must finally take some sort of responsibility.
Itsa shame that a great British company’s future now hangs by a thread. That BP immediately took responsibility for the incident does say something about its corporate responsibility and it looks as though Tony Haywood will become a sacrificial lamb.
Had this been a US company, one would expect a huge cat-fight over whose responsibility this was, with suing and counter suing.
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BP have made mistakes but the hypocrisy of the US government is breathtaking.
They are using BP as a scapegoat for a gas-guzzling energy policy that consumes 25% of the world’s oil in an environment of ever more dangerous extraction.
US consumption and energy regulation should be taken to the cleaners, not BP.