BP 2010 Annual Report Download - page 220

Notesonnancialstatements
44.Contingentliabilitiesandcontingentassets
Contingent liabilities relating to the Gulf of Mexico oil spill
AsaconsequenceoftheGulfofMexicooilspill,asdescribedonpages34to39,BPhasincurredcostsduringtheyearandrecognizedprovisionsfor
certainfuturecosts.FurtherinformationisprovidedinNote2andNote37.
BPhasprovidedforitsbestestimateofcertainclaimsundertheOilPollutionActof1990(OPA90)thatwillbepaidthroughthe$20-billiontrust
fund.Itisnotpossible,atthistime,tomeasurereliablyanyotheritemsthatwillbepaidfromthetrustfund,namelyanyobligationinrelationtoNatural
ResourceDamagesclaims,andclaimsassertedincivillitigation,norisitpracticabletoestimatetheirmagnitudeorpossibletimingofpayment.
Naturalresourcedamagesresultingfromtheoilspillarecurrentlybeingassessed(seeNote37forfurtherinformation).BPandthefederalandstate
trusteesarecollectingextensivedatainordertoassesstheextentofdamagetowildlife,shoreline,nearshoreanddeepwaterhabitats,andrecreational
uses,amongotherthings.Becausetheaffectedareasandtheirusesvarybyseasons,weanticipatethatwewillneedatleastafullyear,andperhaps
materiallylonger,aftertheinitialoilimpactstogainanunderstandingofthenaturalresourcedamages.Inaddition,ifearlyrestorationprojectsare
undertaken,theseprojectscouldmitigatethetotaldamagesresultingfromtheincident.Accordingly,untilthesize,locationanddurationoftheimpacthave
beendeterminedandtheeffectsofearlyrestorationprojectsareassessed,orotheractionssuchaspotentialfuturesettlementdiscussionsoccur,itisnot
possibletoobtainarangeofoutcomesortoestimatereliablyeithertheamountsortimingoftheremainingNaturalResourceDamagesclaims.
BPisnamedasadefendantinmorethan400civillawsuitsbroughtbyindividuals,corporationsandgovernmentalentitiesinUSfederalandstate
courtsresultingfromtheGulfofMexicooilspill.Additionallawsuitsarelikelytobebrought.Thelawsuitsassert,amongothers,claimsforpersonalinjuryin
connectionwiththeincidentitselfandtheresponsetoit,andwrongfuldeath,commercialoreconomicinjury,breachofcontractandviolationsofstatutes.
Thelawsuits,manyofwhichpurporttobeclassactions,seekvariousremediesincludingcompensationtoinjuredworkersandfamiliesofdeceased
workers,recoveryforcommerciallossesandpropertydamage,claimsforenvironmentaldamage,remediationcosts,injunctiverelief,trebledamagesand
punitivedamages.Thesependinglawsuitsareattheveryearlystagesofproceedingsandmostoftheclaimshavebeenconsolidatedintooneoftwo
multi-districtlitigationproceedings.Atrialofliabilityissuesinthependingmulti-districtlitigationiscurrentlyscheduledforFebruary2012.Damageissues
willbescheduledfortrialthereafter.Untilfurtherfactandexpertdisclosuresoccur,courtrulingsclarifytheissuesindispute,liabilityanddamagetrial
activitynears,orotheractionssuchaspossiblesettlementsoccur,itisnotpossiblegiventheseuncertaintiestoarriveatarangeofoutcomesorareliable
estimateoftheliability.SeeLegal proceedingsonpage130forfurtherinformation.
Thereforenoamountshavebeenprovidedfortheseitemsasof31December2010.Althoughtheseitems,whichwillbepaidthroughthetrust
fund,havenotbeenprovidedforatthistime,BP‘sfullobligationunderthe$20-billiontrustfundhasbeenexpensedintheincomestatement,taking
accountofthetimevalueofmoney.Theaggregateofamountspaidandprovidedforitemstobesettledfromthetrustfundcurrentlyfallswithinthe
amountcommittedbyBPtothetrustfund.
Forthoseitemsnotcoveredbythetrustfunditisnotpossibletomeasurereliablyanyobligationinrelationtootherlitigationorpotentialnesand
penaltiesexcept,subjecttocertainassumptionsdetailedinNote37,forthoserelatingtotheCleanWaterAct.Itisalsonotpossibletoreliablyestimate
legalfeesbeyondtwoyears.Thereareanumberoffederalandstateenvironmentalandotherprovisionsoflaw,otherthantheCleanWaterAct,under
whichoneormoregovernmentalagenciescouldseekcivilnesandpenaltiesfromBP.Forexample,acomplaintledbytheUnitedStatessoughtto
reservetheabilitytoseekpenaltiesandotherreliefunderanumberofotherlaws.Giventhelargenumberofclaimsthatmaybeasserted,itisnotpossible
atthistimetodeterminewhetherandtowhatextentanysuchclaimswouldbesuccessfulorwhatpenaltiesorneswouldbeassessed.
Thereforenoamountshavebeenprovidedfortheseitems.
ThemagnitudeandtimingofpossibleobligationsinrelationtotheGulfofMexicooilspillaresubjecttoaveryhighdegreeofuncertaintyas
describedfurtherinRisk factorsonpages27to32.Anysuchpossibleobligationsarethereforecontingentliabilitiesand,atpresent,itisnotpracticableto
estimatetheirmagnitudeorpossibletimingofpayment.Furthermore,othermaterialunanticipatedobligationsmayariseinfutureinrelationtotheincident.
Contingent assets relating to the Gulf of Mexico oil spill
BPistheoperatoroftheMacondowellandholdsa65%workinginterest,withtheremaining35%interestheldbytwoco-owners,AnadarkoPetroleum
Corporation(APC)andMOEXOffshore2007LLC(MOEX).UndertheOperatingAgreement,MOEXandAPCareresponsibleforreimbursingBPfortheir
proportionatesharesofthecostsofalloperationsandactivitiesconductedundertheOperatingAgreement.Inaddition,thepartiesareresponsiblefortheir
proportionatesharesofallliabilitiesresultingfromoperationsoractivitiesconductedundertheOperatingAgreement,exceptwhereliabilityresultsfroma
party‘sgrossnegligenceorwilfulmisconduct,inwhichcasethatpartyissolelyresponsible.BPdoesnotbelievethatithasbeengrosslynegligentnorhas
itengagedinwilfulmisconductunderthetermsoftheOperatingAgreementoratlaw.
Asof31December2010,$6billionhadbeenbilledtotheco-owners,whichBPbelievestobecontractuallyrecoverable.Billingstoco-ownersare
baseduponcostsincurredtodateratherthanamountsprovidedintheperiod.Asfurthercostsareincurred,BPbelievesthatcertainofthecostswillbe
billabletoourco-ownersundertheOperatingAgreement.
Ourco-ownershaveeachwrittentoBPindicatingthattheyarewithholdingpaymentinlightoftheinvestigationssurrounding,andpending
determinationoftherootcausesof,theincident.Inaddition,APChaspubliclyaccusedBPofhavingbeengrosslynegligentandstatedithasnoliabilityfor
theincident,bothofwhichclaimsBPrefutesandintendstochallengeinanylegalproceedings.Therearealsoauditrightsconcerningbillingsunderthe
OperatingAgreementwhichmaybeexercisedbyAPCandMOEX,andwhichmayormaynotleadtoanadjustmentoftheamountbilled.BPmay
ultimatelyneedtoenforceitsrightstocollectpaymentfromtheco-ownersthroughanarbitrationproceedingasprovidedforintheOperatingAgreement.
Thereisariskthatamountsbilledtoco-ownersmaynotultimatelyberecoveredshouldourco-ownersbefoundnotliableforthesecostsorbeunableto
paythem.
BPbelievesthatithasacontractualrighttorecovertheco-owners‘sharesofthecostsincurred,however,norecoveryamountshavebeen
recognizedinthenancialstatementsasat31December2010.
218BPAnnualReportandForm20-F2010