BP agree settlement two years after Gulf of Mexico oil spill

British Petroleum (BP) has reached a settlement with the US Department of Justice (DoJ) following its part in the Deepwater Horizon event in 2010.

The settlement reached a total of $4.5 billion (€3.5 billion) to resolve all federal criminal charges and claims by the Securities and Exchange Commission. The agreement is also cash positive because it also clarifies the level of criminal fines imposed on BP.

The Deepwater Horizon event occurred after an explosion accidentally caused a BP oil spill to hit the Gulf of Mexico in 2010. It flowed for three months and released almost 5 million barrels of crude oil, making it the largest marine oil spill in petroleum history.

 While BP has accepted criminal responsibility for the accident, it has done so on the ground of “negligence” as opposed to “gross negligence” as it eliminates the threat of a possible indictment by the Department of Justice and reduces the chances of BP being barred from future US government contracts.

The settlement with the DoJ will increase case-related provisions by approximately $3.85 billion and take the total pre-tax charge to just under $42 billion. BP has committed to paying the agreed $4.5 billion over a six-year period with no single instalment exceeding $1.2 billion in any one year.

BP is still facing civil claims however including those arising under the Clean Water Act and the DoJ has said it is determined to prove BP’s gross negligence before the civil courts.