As US launches criminal probe BP loses $21-bn in market cap

Investors have lost $21 billion from the fall in British oil giant British Petroleum's market value as an angry US government launched a criminal and civil investigation into BP's uncontrollable oil spill yesterday after the British oil giant's latest effort, the 'top kill' technique, failed to stem the flow of oil into the Gulf of Mexico.

This led to the London-based oil major immediately losing 15 per cent or $21 billion of its market value from $146 in a single day yesterday, taking the total decline to 40 per cent or $74 billion in loss of market value from $186 billion since the onset of the disaster, which has now enters its 44th day today.

With the US announcing the launch of the criminal and civil probel yesterday into the worst oil spill in the history of the US, the future of the company is now in doubt, say analysts.

US Attorney General Eric Holder said yesterday, "We will closely examine the actions of those involved in the spill. If we find evidence of illegal behaviour, we will be extremely forceful in our response.''

On being questioned by reporters whether the charges would include BP making false statements, Holder said, ''nothing is off the table at this point."

The US action came after a frustrated US President Barack Obama resigned himself to the fact that the oil spill could be plugged only in August after BP finishes drilling two relief wells.

President Obama has now called for punitive action and asked for a full and vigorous accounting of the causes of the oil spill and told the new oil-spill commission to fully investigate, without limits, the company's culpability in causing the spill.

''My solemn pledge is that we will bring those responsible to justice,'' he said and has given the commission six months to finish the probe.

Although Holder did not specify which companies would be under investigation, it is abundantly clear that BP, Transocean and Halliburton will come under intense scrutiny.

All three companies have been told by the US federal agencies to preserve all paperwork regarding the Deepwater Horizon rig for the investigation.

"As our review expands in the days ahead, we will be meticulous, we will be comprehensive, and we will be aggressive," Holder told reporters yesterday. "We will not rest until justice is done."

Meanwhile the US government has banned all oil and gas companies from exploratory drilling in the deepwater of the US Gulf of for a period of six-months.

The oil spill began with an explosion on the Deepwater Horizon rig on 20 April killing 11 people and BP initially claimed that only 1,000 gallons of oil was spilling into the sea (See: BP caught in the sludge of potentially worst oil disaster in US history) 

BP revised the figure to 5,000 barrels and later to approximately 200,000 gallons, but after conducting extensive tests last week government scientists said that the oil spil was estimated between 500,000 and 4,200,000 gallons per day.

The current oil spill has eclipsed the Exxon Valdez tanker spill of 1989 that poured11 million gallons off the Alaska coast to become the worst oil disaster in US history, but the Deepwater Horizon rig has overtaken that figure and has spilled an estimated 18 million to 40 million gallons of oil so far.

The reason for BP fudging the oil spill figures is that under the US Clean Water Act and Oil Pollution Act of 1990, penalties are levied at $1,100 for every barrel of oil spilled into the gulf. The penalty is enhanced if negligence is proved

BP said in a statement today that it has spent more than $940 million or 15 per cent of its first quarter net income so far in trying to contain the disaster.

But oil majors have the knack of escaping huge fines by fudging records and bribing politicians and judges if the oil spill has occurred in third-world countries.

In a 2005 explosion at a Texas oil refinery that killed 15 workers and injured 170, BP paid a measly $50 million in fines, while ExxonMobil, the largest oil company in the US, got away  with just $125 million for the Valdez spill in Alaska, then the then worst oil spill in US history.

Chevron is currently facing about $27 billion in damages for dumping toxic waste from its oil production in the Ecuador rainforests that has created a living nightmare for the tens of thousands of indigenous people living in the Amazon rain forest.

Chevron has also been dodging the case for the past two decades and has used every trick in the book to delay the lawsuit bought on by about 30,000 Amazonians that has destroyed the entire ecology and life at the Amazon rain forest.

It is amazing that oil majors, which earn billions of dollars from deepwater oil extraction, have not invested in research for containment of spill in the event of a blowout.

The Gulf of Mexico spill has revealed that oil companies do not have a clue to contain an oil spill that is often miles underwater.

Twelve of the top global oil companies have made a net profit of over $176 billion collectively last year, a time when oil prices had come down due to the global recession, which had sawed their bottom lines.

Figures for 2009 in billions of US $

Company Country Revenues Net Profit
ExxonMobil US 310.5 19.28
Royal Dutch Shell Netherlands/UK 278 12.5
Chevron US 273 23.9
British Petroleum UK 246.1 16.58
Total S A France 161.3 10.4
PetroChina China 160.8 15.1
ConocoPhillips US 136 4.8
CNPC China 110.50 13.2
Petrobras Brazil 104.9 16.6
Gazprom Russia 98.6 25.3
OAO Lukoil Russia 81.1 7.1
Statoil Norway 71.65 2.72
Total 2032.45 176.48

Table compiled by Ravi Kunder: domain-b from company figures till December 2009
 
Despite the massive profits, none of the oil companies have invested in systems, equipments, technical expertise to contain deepwater oil spills.

It would be interesting to know what BP would have done if the spill had occurred in the Indian Ocean or in the sea in some African coast.