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Royal Dutch Shell Shareholders Beware

Screen Shot 2014-09-06 at 21.06.55The news that BP may be fined up to $18bn for the oil spill in the Gulf-of-Mexico as a result of a ruling by a US federal court that BP acted with “conscious disregard of known risks” and that BP’s “conduct was reckless,” may have very serious implications for other oil companies.

By John Donovan

The news that BP may be fined up to $18bn for the oil spill in the Gulf-of-Mexico as a result of a ruling by a US federal court that BP acted with “conscious disregard of known risks” and that BP’s “conduct was reckless,” may have very serious implications for other oil companies.

Extract from a New York Times article:

The ruling stands as a milestone in environmental law given that this was the biggest offshore oil spill in American history, legal experts said, and serves as a warning for the oil companies that continue to drill in the deep waters of the Gulf of Mexico, where high pressures and temperatures in the wells test the most modern drilling technologies.

BP has already paid out over $28bn on damage claims and cleanup expenses, so the total cost to BP for the disaster could be north of $50bn, as estimated in a BloombergBusinessweek article “BP Ruling ‘Wakeup Call’ as Risks Mount in Oil Search”

This is indeed a warning of what could happen to Royal Dutch Shell during its next foray into Arctic waters, bearing in mind the debacle in 2012 brought about by gross negligence.

Extract from the BloombergBusinessweek article

Problems have arisen as companies drill deeper and in more perilous conditions. Shell last week submitted a plan for drilling in Alaska’s Arctic, after a vessel ran aground in 2012. The ultra-deep Davy Jones well in the Gulf, among the most expensive ever drilled, has yet to produce what operator Freeport-McMoRan Copper & Gold Inc. has said may be trillions of cubic feet of gas. The complexity of deep drilling or navigating Arctic waters means that further accidents may be inevitable, said Ed Hirs, an energy economist at the University of Houston.

BP, which has been almost destroyed and remains deeply wounded, is now a potential takeover target, as is correctly stated in a NewsMax.com article.

Extract

Once one of the biggest and most powerful oil companies in the world, BP faces years more of uncertainty that will put continued pressure on shares and may open the company to takeover pressure from larger rivals such as Royal Dutch Shell Plc or Exxon Mobil Corp.

Royal Dutch Shell could find itself in a similar distressed situation if things go wrong again in Alaska’s Arctic.

RELATED

UK Gov’t Backs BP In Appeal Of $9.2B Deepwater Settlement

Law360, New York (September 08, 2014, 5:05 PM ET) — The U.K. government weighed in Thursday on BP PLC’s U.S. Supreme Court appeal of the $9.2 billion settlement that allows claims for people who suffered no injury from the Deepwater Horizon oil spill, arguing paying them would undermine the “vigorous and fair resolution of disputes.”

In its amicus curiae brief, the U.K. said that BP should not be required to compensate people who suffered no injury from the 2010 disaster despite two Fifth Circuit decisions allowing the claims.

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