Obama mortgages the Gulf of Mexico to BP

[Hannah Bell]

In a deal that has sweeping, long-term implications for millions of people living and working along the US Gulf Coast, the Obama administration has agreed to base the payments by BP to the oil disaster fund on the oil giant’s profits from its drilling operations in the Gulf...

Commenting on the Obama-BP talks as they were coming to a head, the Wall Street Journal noted Monday that an agreement tying the escrow fund to production revenues “would give both sides an incentive to continue production in the Gulf, scene of the U.S.’s worst-ever offshore oil spill.” The consumer lobby Public Citizen took note of the same fact. Its director, Tyson Slocum, said in a statement that securing the compensation fund with drilling revenue “is wildly inappropriate, as it will make the government and BP virtual partners in Gulf oil production. ... It will give the government a financial incentive to become an even bigger booster of offshore oil drilling in the Gulf.”

BP operates 89 producing wells in the Gulf of Mexico and owns a stake in 60 Gulf wells operated by other oil companies. The combined BP production from all 149 wells is about 400,000 barrels a day, worth $32 million a day, or $11.6 billion a year, at a market price of $80 a barrel. The Gulf accounts for 10 percent of BP’s worldwide production.

Such figures demonstrate how tiny, relative to BP’s assets, the $20 billion commitment to the Gulf really is. BP collects that much revenue worldwide every two months. Two years of Gulf oil revenue alone would pay the full cost of the disaster fund.

http://www.wsws.org/articles/2010/aug2010/gulf-a12.shtml

[autorank]

1. Beyond Perdition k*r Same as it ever was...

[truedelphi]

2. because of the moratorium, some of the other firms have pulled their rigs out of the Gulf.

Twenty Billion bucks, paid out over many years, must seem like a small price to pay for hacking up the competition.

[dipsydoodle]

3. Accounting for idiots

Typical article which conveys misleading information in the hope that some halfwits will simply accept it and this isn't a defence of BP.

At y/e 2009 BP's net assets were $100 billion and compared with that $20 billion is hardly tiny. With the adjustments made at 2010 half year their net asset value reduced to $80 billion which makes it even less tiny in comparison.

The issue here was that of providing a GUARANTEE because the Administration would not accept BP's assurance they were able to make the payments from operating cash flow and sales of selected corporate assets. The suggested solution provides that guarantee.

[Hannah Bell]

4. what are you babbling about?

Revenue US $246.1 billion (2009)<2>

Operating income US $26.43 billion (2009)<2>

Net income US $16.58 billion (2009)<2> (this is their PROFIT)

Total assets US $236.0 billion (2009)

Total equity US $101.6 billion (2009)




$20 B = 125% of one year's profit.

"adjustments" = jiggerty pokerty to benefit bp

"guarantee" = there's no such thing, & the arrangement does indeed tie the compensation to continued production in the gulf.

it's a hatchet to wield over anyone suggesting they do things differently there.