BP cleanup cost soars as spill estimates double

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BP's liabilities have sky-rocketed in tandem with estimates of the growing scale of the Gulf of Mexico oil spill, as analysts believe the company may eventually pay out more than $4 billion.

The British oil giant's costs are tied to new estimates that put the amount of oil spilled at between one and two million barrels so far, double the previous estimate, Wall Street experts said Friday.

"It is more than just the environmental damage," said David Kotok of Cumberland Advisors, "the dispute as to how many barrels of oil are flowing daily into the Gulf is a dispute over money.

"The money issue is about the fines that BP is destined to pay. They are assessed on a per-barrel rate," said Kotok.

US government data on Thursday suggested the oil's flow before a containment system was put in place last week was between 25,000 and 30,000 barrels a day and could be upwards of 40,000 barrels a day.

If negligence is proven, fines could be as high as US$4,300 per barrel an amount that could triple if there is a criminal fine, Kotok said.

The cost to BP so far would stand at $4.3 to 8.6 billion, if the latest flow and cost estimates prove correct.

"And we are still looking at three more months before the well is expected to be sealed," he said.

Because of the soaring liability BP will likely bow to US pressure and suspend dividend payments, due July 27, British media reports said Friday.

The Times newspaper said BP was preparing to place the second-quarter dividend money an expected $1.7 billion in an escrow account in an attempt to ease political pressure on the firm.

BP directors were to meet on Monday to discuss the payments, the BBC reported, although the decision was not expected to be announced at least until company bosses meet US President Barack Obama at the White House on Wednesday.

BP CEO Tony Hayward told The Wall Street Journal that the discussions were ongoing. "We are considering all options on the dividend. But no decision has been made," he said.

Top US lawmaker Nancy Pelosi urged BP not to pay dividends and echoed pleas from Obama not to shortchange those hit by the disaster.

The final price tag is still a guess because it is still unclear how much oil is flowing from the well, how long the spill will last, and how far the oil will travel.

The firm's share price has fallen over 40 percent since the rig exploded April 20, prompting speculation about bankruptcy and a takeover bid.

Still, much of the cost of that cleanup effort has already been factored into the company's share price, according Goldman Sachs, suggesting the worst of BP's financial storm may have passed.

The New York-based investment bank estimated that the market is discounting around $33 billion of net damages from the spill.

This is in the "in the upper end of our estimated liability range," Goldman told investors on Friday.

Fellow Wall Street firm Standard and Poor's estimated BP will have to pay $6 billion in damages as long as the well is plugged within 12 months.

Goldman estimated that a "conservative mid-case scenario" would see BP pay $36 billion in damages, "with a reasonable worst-case scenario of $60 to 70 billion."

Kotok was even more pessimistic: "If (oil)" gets it into the Gulf Stream, we will go to our disaster case and this event will become a hundred-billion-dollar nightmare."

Thad Allen, the Coast Guard admiral heading the US response to the catastrophe, said BP was working to double the amount of oil it could recover from a containment system placed over the leaking well.

Allen said he was reviewing BP plans to collect 40,000 to 50,000 barrels of oil a day by July once a more permanent cap has been placed over the well, up from the current 28,000 barrels per day.

There will be no permanent solution until the first of two relief wells is completed, in August at the earliest, allowing the leak to be plugged with cement.

Florida Governor Charlie Crist said the "moving numbers" on the estimates of gushing oil was undermining trust in BP.

"It makes it difficult and creates sort of a natural cynicism, if you will" we've got to verify the information we're getting. It needs to be accurate. Otherwise it makes it hard to respond accordingly," Crist told CNN.

Amid fears of an anti-British backlash in the United States over the spill, British Prime Minister David Cameron will discuss BP's handling of the crisis with Obama over the weekend.

Spill response operations were suspended Friday near a natural gas platform in Cocodrie, southwest Louisiana, after 36 workers were taken to hospital when their supply vessel broke open a gas line while mooring, the Joint Command Center said.

As a precaution, some 800 response workers aboard 120 vessels were recalled to shore from the area, BP said.

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