Judge calls for BP to indemnify Transocean in 2010 gulf oil spill

BP PLC is required to indemnify drilling contractor Transocean Ltd., the owner of the Deepwater Horizon semisubmersible drilling rig, against compensatory damages in the Gulf of Mexico oil spill off Louisiana in 2010, according to US District Judge Carl Barbier of New Orleans.

BP was operator of the deepwater Macondo well. An Apr. 20, 2010, blowout resulted in an explosion and fire on the Deepwater Horizon rig. Eleven workers were killed, the semi later sank, and the incident caused a massive oil spill.

Barbier on Jan. 26 granted Transocean partial indemnification in Transocean’s request for a summary judgment (OGJ Online, Nov. 1, 2011).

Transocean said the ruling confirms BP is responsible for economic damages caused by the oil spill.

BP also issued a statement, indicating that it considers the ruling a partial victory for BP. “Under the decision, Transocean is, at a minimum, financially responsible for any punitive damages, fines, and penalties flowing from its own conduct,” BP said. “As we have said from the beginning, Transocean cannot avoid its responsibility for this accident.”

The drilling contractor remains exposed to punitive damages and Clean Water Act fines, analysts noted.

James C. West, an analyst with Barclays Capital in New York, called the ruling a good sign for Transocean.

“We believe the headline is positive and improves Transocean's footing in regards to a settlement with BP,” West said.

Transocean said it was pleased to see its drilling contract indemnification affirmed. Under the contract, BP had responsibility for any pollution from the well.

“This confirms that BP is responsible for all economic damages caused by the oil that leaked from its Macondo well, and discredits BP’s ongoing attempts to evade both its contractual and financial obligations,” Transocean said.

Federal investigators have blamed the incident on multiple causes, saying BP, Transocean, and Halliburton Co. all had some role in the incident although BP bears final responsibility for the spill. Halliburton handled the cementing work on the well.

The National Academy of Engineering and National Research Council said in its final report on the incident that both the industry and regulators misplaced confidence in the ability of blowout preventers (BOPs) to act as fail-safe mechanisms (OGJ Online, Dec. 15, 2011).

A civil trial is scheduled to start in New Orleans on Feb. 27. BP’s attorneys are talking with multiple parties in an effort to reach settlements that would resolve as many issues as possible before that. The companies have countersued each other.

Previously, Cameron International Corp., which manufactured the BOP used on the Deepwater Horizon, agreed to pay a $250 million settlement to BP, and BP agreed to indemnify Cameron for current and future compensatory claims associated with an oil spill (OGJ Online, Dec, 16, 2011).

Contact Paula Dittrick at paulad@ogjonline.com.

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