Gulf of Mexico oil spill cost: $3.12 billion

The spill has cost $3.12bn so far

The Gulf of Mexico accident and clean-up has so far cost BP a grand total of US$3.12 billion. A large amount of money to be sure, but if estimates are to be believed, costs are expected to spiral close to US$40 billion.

According to industry reports, the amount of money spent so far has covered the costs of containing the spill and cleaning up the oil, and the cost of drilling relief wells - all jobs that are set to continue for the foreseeable future, as the leaking well is still not sufficiently capped.

Also included in the costs is the US$147 million so far paid out in compensation to those businesses and communities affected by the spill.

This week's new cost total is an indicator of how far costs are rising, especially as a week ago the cost was calculated at US$2.65 billion. The ever-increasing costs have led many to speculate how long BP will be able to afford the clean-up before possibly going bankrupt.

News that BP have sent financial demands to their partners has only fueled speculation. According to The Guardian, BP last month sent out demands for almost US$400 million to Anadarko and Japan's Mitsui Oil Exploration Company, both of whom are minority shareholders in the well. That is equivalent to 40 percent of the $1 billion BP said it spent in May. Anadarko owns 25 percent of the well and Mitsui has 10 percent.

The fact that BP is alleging demanding payment within 30 days has led many industry analysts to speculate that the oil giant might be in more financial trouble than initially indicated. They could face even bigger problems though, as Anadarko is refusing to pay citing that they have no part in the disaster and that BP's actions amounted to "gross negligence or wilful misconduct". Mitsui have likewise made no indication that they will pay.

The news is a massive blow for BP who have stated they will do everything that they can to restore the Gulf of Mexico to its previous condition, but may not have the monetary funds to back up their promises. Currently, the oil firm is having to finance up to 44,500 people, 6,563 vessels and 113 aircraft working on clean-up operations.

Ongoing disaster

Although some of the oil is being collected, the ruptured well is still leaking while work continues on the relief wells. Work on the first relief well is continuing despite reaching a depth of 17,725 feet on 4 July. The second relief well, which started 16 May, has now reached 13,871 feet. Both wells are expected to take three months to complete from start to finish.

Meanwhile, operations to skim oil off the surface of the water have been temporarily delayed due to the start of hurricane season and Hurricane Alex sweeping through the area. To date, 673,497 barrels of oily liquid have been recovered, while a total of 275 controlled burns have been carried out. While these burns have reportedly removed an estimated 238,000 barrels of oil from the Gulf, BP has courted controversy by apparently burning sea turtle communities in the process.

All of this has led to industry experts wondering whether a takeover of BP is on the cards, with Exxon Mobil and Shell rumoured as potential buyers. BP, of course, has denied such claims saying, "We welcome new shareholders and existing shareholders increasing their holding, but there are no current plans to issue new equity."

One thing is certain, if costs continue to spiral BP may have to file for Chapter 11 much sooner than many have predicted.

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Timon Singh

Timon Singh is a graduate of Liverpool University where he received a degree in Social and Economic History. He has previously worked for BBC Magazines on BBC Who Do You Think You Are? Magazine, the publication for the popular genealogy show.

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