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BP offers Barack Obama clean-up billions

From The Sunday Times

June 13, 2010

Danny Fortson

BP is considering putting several billion dollars into a ring-fenced clean-up fund to appease American concerns over the soaring cost of the Gulf of Mexico oil spill.

The fund is one of several options to be put to the company’s board tomorrow ahead of a meeting on Wednesday between Barack Obama and Carl-Henric Svanberg, BP’s chairman. Yesterday Obama told David Cameron, the prime minister, he had “no interest in undermining” the company’s value.

BP’s directors are discussing a reduction in dividend payments as part of a peace offering to Obama, who has made stinging attacks on the group and its management. Company sources said directors were not likely to axe the payout completely and were trying to find a middle way. “They know it can’t be business as usual.”

One adviser said the fund would help tackle the “Valdez factor”, a reference to the 1989 Exxon Valdez oil tanker disaster, claims for which are still tied up in court. “We need to show we are willing to pay upfront and won’t wait for litigation.”

Svanberg will be given a more prominent role. He has been criticised for remaining largely out of sight during the crisis.

BP has, meanwhile, drafted in a phalanx of extra advisers to counsel it on its options. The team includes John Studzinski at Blackstone, the American investment firm, and Goldman Sachs, the Wall Street giant and long-standing BP adviser.

The company is vulnerable to takeover. Its shares have shed 40% of their value in the past two months. The company was worth £73 billion on Friday. The most likely bidders would be Exxon Mobil, the world’s largest oil company, and Chevron, its rival. Sector sources said nobody is likely to make a run at BP until the political temperature cools and the oil leak is stopped. Industry sources warned that if Obama’s administration removes a cap on potential liabilities, as several politicians have proposed, BP could be forced into Chapter 11 bankruptcy protection.

Last week an American government panel increased its estimates of the size of the leak, saying the well was spewing as much as 40,000 barrels a day, equivalent to the Exxon Valdez spill every five days.

The revelation heaped further pressure on BP in America, where it has been vilified in the press and by Obama. The president has suggested that Tony Hayward, BP’s chief executive, should be sacked and that the company should halt its dividend until the clean-up is completed.

Hayward faces a grilling by the House oversight and investigations sub-committee on Thursday. To prepare he will face a “murder board” — a dress rehearsal by his lawyers.

The appearance may be made more difficult by the next phase in BP’s effort to control the spill. It is capturing 16,000 barrels a day from the well and this weekend will hook up another system to take an extra 5,000-10,000 barrels. The oil will not be captured but burnt off, creating an enormous plume of black smoke. Politicians and environmentalists have expressed concerns about the resulting pollution.

BP said this weekend that two tankers capable of handling 50,000 barrels a day would not be available for another month.

Transocean, the drilling company whose rig blew up, causing the oil spill, is to go ahead with a bumper dividend payout. It will give shareholders $1 billion (£687m) despite pressure from American legislators.

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