Mitsui deal fuels hopes of BP settlement on Gulf spill

BP investors took heart yesterday after one of its drilling partners agreed a $90m (£57m) settlement with the US government over the fatal disaster at the Macondo oil well in the Gulf of Mexico, fuelling hopes that BP will do the same, and at a sharply lower cost than was previously expected.

The Macondo lawsuit is scheduled to start next week but news that Mitsui of Japan, which owned a 10 per cent stake in the well that exploded in April 2010, has become the first company to settle with US authorities saw City analysts suggest BP could do the same.

The terms of Mitsui's $90m Clean Water Act penalty mean BP could pay as little as $900m for its own damage, almost a quarter of what it had put aside. The Japanese firm's fine works out at about $175 for each barrel of the 4 million barrels of oil spilt, sharply lower than the potential maximum of $4,300 per barrel leaked into the Gulf.

"This shows the Department of Justice's willingness to settle the case and implies that the potential Clean Water Act liability could be settled at $900m, well below the $3.5bn BP has provisioned for," said Alejandro Demichelis, an oil analyst at Bank of America Merrill Lynch. He added that subsidiary Moex's position "could be seen differently from BP's as operator".

With the Macondo trial due to start next Monday, Mr Demichelis said this week "will likely be critical for BP": "Considering the Moex deal, we should see progress on potential settlements with the different parties involved. This includes contractors, Department of Justice and other plaintiffs."

Bob Dudley, the BP chief executive, has said: "We are prepared to settle if we can do so on fair and reasonable terms... If this is not possible, we are preparing vigorously for trial."

Next week's lawsuit will determine the level of fines and pollution violations that BP and its co-defendants Transocean and Halliburton will have to pay. Shares in BP rose by 10.3p to close at 499.25p last night.