BP Woes Worsen on US Investigation into Deepwater Oil Disaster 'Lies'

BP Deepwater Horizon Disaster — A former BP Engineer is the first to be charged in the Deepwater Horizon disaster of 2010. Kurt Mix, of Katy, Texas, has been arrested and accused of deleting text messages detailing how much oil was gushing into the Gulf of Mexico. REUTERS/Handout .

UK oil giant BP is being slammed by another US federal investigation that centres on claims that BP representatives lied to Congress about how much oil had leaked into the Gulf of Mexico, following the Deepwater well blowout in 2010.

According to a report in the Wall Street Journal, the federal investigators findings could lead to additional criminal charges against current and former employees, should the investigators find evidence of wrong doing.

"Just as we worked with the government in responding to the spill, we are cooperating with its investigation," says a BP spokesperson to the IBTimes UK with no further comment on the report.

Investigators are allegedly looking into statements made by BP officials to members of Congress, which includes documents from a briefing on 4 May 2010, where officials discussed the rate at which oil was spilling into the ocean, according to the WSJ.

The oil spill fallout

On 20 April 2010, there was an explosion on BP's Horizon rig, which resulted in one of the largest oil spills and environmental disasters in history. While, oil immediately spewed out into the Gulf of Mexico, the estimates of how much and at what rate this was occurring was being constantly revised by BP and the US government.

In January 2011, the Presidential Commission filed its final report on the BP Deepwater Horizon Oil Spill and Offshore Drilling incident.

In the final report, the National Commission found that the spill could have been prevented if operator BP, rig owner Transocean and contractor Halliburton had not made a number of mistakes in the Macondo well blowout.

"These mistakes reveal such systematic failure in risk management that they place in doubt the safety culture of the entire industry," said the report.

According to estimates, at the time, 4 million barrels of oil was leaked into the US Gulf of Mexico and independent groups had constantly revised forecasts.

Under The US Clean Water Act, BP still faces a civil fine over the accident. The total amount of oil that was spilled into the ocean is critical for the verdict and will determine the final penalty. The US government's final total estimate is 4.9 million barrels, which equates to a rate of 53,000 and 62,000 barrels of oil per day.

While the Gulf of Mexico oil spill resulted in an environmental disaster, it also caused colossal damage to the group's reputation and earnings. Even two years on, BP is still feeling the repercussions of the incident.

This month, Bob Dudley, chief executive officer at London-based BP tried to quell investor concerns over the aftermath of the Gulf of Mexico oil spill, after selling off assets, lifting output and raising dividend.

However, the company still faces significant legal liability for the disaster in the United States even after agreeing with the US Department of Justice to pay at least $7.8bn deal to victims of the explosion.

In a statement on the day it reported its earnings this month, BP said that it would continue its disposal programme, putting some smaller fields in the Gulf of Mexico block and that the group was not pulling back from the area but was seeking to focus on larger fields there.

BP reported a larger-than-expected drop in first quarter profit as production fell after it was forced to sell oil fields in order to pay for the Gulf of Mexico oil spill, this month.

Net income at Europe's second-largest oil major fell to $5.9bn in the first quarter this year, from $7.4bn in the same period in 2011. Its replacement cost net profit was $4.93bn in the first quarter this year, compared with $5.61bn in the same period last year.

As BP tries to fight against various lawsuits, litigation and falling profit, it looks like it is still facing turmoil internally, following the Gulf of Mexico oil spill.

TNK BP schism widens

The Gulf of Mexico oil spill, not only ruptured confidence in BP at inception but it has apparently had lasting effects on some of its most profitable businesses.

Yesterday, Russian billionaire Mikhail Fridman resigned abruptly as chief executive of the 50-50 joint venture, TNK-BP. The group currently accounts for about 29 percent of BP's total oil production.

The group has been fraught with tension for a number of years at executive board level.

"I mentioned in [my blog yesterday] that Mikhail Fridman had announced his retirement from TNK-BP and this has certainly set the cat amongst the pigeons as various prophets 'o doom realised quite how important this could be for the company," says Malcolm Graham-Wood, analyst at VSA Capital Limited. "Certainly if the TNK-BP board is not quorate then technically it can't pay out dividends but that is probably not BP's biggest headache, with so much of the company's cash flow coming from Russia BP need to address the problem. The trouble is that there is little or no sign that the top level of BP's management is ready, willing or able to solve the conundrum. With BP probably not able to buy out AAR and BP not willing to sell out themselves the best guess is that what is needed here is a third party and it knows it can't count on Rosneft. Time for management to wake up and smell the coffee, not for the first time recently, shareholders need the board to act decisively, if not at 400p BP is surely in the sights of someone who will."

TNK BP did not add any other comment, other than confirm Fridman's resignation and that "after Mikhail Fridman's resignation, TNK-BP will be managed by a group of executives who hold powers of attorney related to their areas of responsibility. AAR shareholders German Khan and Victor Vekselberg remain with the business as Executive Directors and Members of the Management Board."

According to a source cited in the Financial Times, Fridman left over a "breakdown in governance."

"The Russian shareholders have lost faith in BP as a partner," said the source to the FT. "This partnership appears to have run its course and we are most likely heading towards some kind of disengagement."

Shares in BP rose by 0.9 percent, or 3.6 pence, in today's session to trade at 403.35p as of 1310 GMT.

Clean Water Act