BP could face billions in oil-spill costs

Mass Casualties Posted on

The oil spill spreading across the Gulf of Mexico has drained $32 billion from BP's stock market value. Lawsuits, fines, cleanup and reputation-repair are certain to cost the company billions more and could tie up BP for many years to come.Yet the still-unfolding environmental disaster isn't likely to put one of the world's largest oil companies out of business.

BP PLC earned close to $40 billion in 2008 and 2009 combined, and more than $6 billion in the first three months of 2010.

Exxon Mobil — which shelled out more than $4 billion in cleanup costs and legal payouts after the Exxon Valdez spill in Alaska 21 years ago — managed to pull through the disaster just fine. Today it is the world's largest publicly traded oil company.

In the long run, BP will be fine too, said Mark Gilman, an analyst at The Benchmark Co

"Let's not get hysterical here," he said. "They're going to survive this."

Still, London-based BP will face a litany of challenges as a result of last month's accident, not the least of which will be scrutiny from politicians and regulators in Washington. BP could find itself at a competitive disadvantage when vying for offshore drilling permits if the Obama administration moves ahead with plans to open vast swaths of the U.S. coast to oil exploration.

How much the disaster costs depends on how much worse the spill becomes, and how much fault is ultimately assigned to BP for the oil-rig explosion and fire that caused the spill. The oil company leased the offshore platform from Transocean Ltd. and hired subcontractors, including Halliburton Co., to help drill the well that is now spewing an estimated 200,000 gallons a day.

On Monday, BP gave assurances to shrimpers, oil workers and scores of others that they will be compensated for any "legitimate and objectively verifiable" claims.

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