BP boss faces angry US lawmakers

June 17, 2010 12:00 am

, WASHINGTON, Jun 17 – BP\’s chief executive faces a flaying from furious US lawmakers on Thursday over the Gulf of Mexico oil spill, a day after the energy giant pledged at least $20 billion for compensation claims.

Tony Hayward faces fuming US lawmakers, some of whom have publicly suggested senior BP officials should "commit hara-kiri," after he and BP Chairman Carl-Henric Svanberg were summoned to the White House on Wednesday.

In addition to the $20 billion compensation fund, the British firm announced it would halt shareholder dividends this year, and Svanberg pledged that spill-related claims would be handled "swiftly and fairly."

"We have made clear from the first moment of this tragedy that we will live up to all our legitimate responsibilities," he said.

"We will look after the people affected, and we will repair the damage to this region, the environmental damage to this region and to the economy," he added, making the surprise announcement of a $100 million foundation to help unemployed rig workers.

The compensation fund will be run by prominent lawyer Kenneth Feinberg, who managed compensation claims by victims of the September 11, 2001 terror attacks, and will be overseen by a panel of three judges who can hear appeals.

BP will fund the account in four annual payments of $5 billion, the White House said.

"This account is neither a floor nor a ceiling on liability," a statement said, adding BP would not seek to take advantage of the $75 million federal liability cap for oil companies.

The announcement represented a major victory for President Barack Obama, who has struggled to assert leadership over the crisis, and was welcome news for the thousands of people whose livelihoods are threatened by the spill.

"It is probably the best news I\’ve gotten since this thing started. It gives us some security for the future," Brent Roy, whose fishing charter business in Venice, Louisiana has been shut down for a month, told AFP.

The $20 billion pledge comes amid speculation about BP\’s financial health, which both British and US political leaders have sought to dismiss.

British finance minister George Osborne told the BBC on Thursday that BP was a "very strong company," and Obama said Wednesday he was "absolutely confident BP will be able to meet its obligation to the Gulf Coast and to the American people."

"BP is a strong and viable company and it is in all of our interests that it remain so," he said.

But the scale of the company\’s difficulties was hinted at Wednesday when chief financial officer Byron Grote announced that it planned to offload $10 billion of assets.

Analysts said BP, which has already spent some$ 1.6 billion battling the spill and made a profit of around $14 billion in 2009, should be strong enough to weather the storm even if it has to borrow more.

"They have enough cash flow and quality assets that will allow it to fund that type of liability," said Jason Gammel of Macquarie Research.

The firm\’s final bill will be tied to the amount of oil still spewing into the ocean each day, with US experts now putting that figure at between 35,000 and 60,000 barrels.

BP is siphoning up an average of 15,000 barrels a day of oil to two processing ships on the surface. It hopes to increase that amount significantly in the coming weeks.

But the leak is not expected to be permanently capped until August, when one of two relief wells being drilled is complete.

On Thursday, according to prepared testimony, Hayward will tell lawmakers that the explosion aboard the BP-leased Deepwater Horizon rig that sparked the spill was virtually impossible to predict.

"I understand people want a simple answer about why this happened and who is to blame," Hayward said.

"The truth, however, is that this is a complex accident, caused by an unprecedented combination of failures."

Hayward will also tell lawmakers he is "personally devastated" by the spill.

"The explosion and fire aboard the Deepwater Horizon and the resulting oil spill in the Gulf of Mexico never should have happened – and I am deeply sorry that they did."

The apology is unlikely to win sympathy among lawmakers like Louisiana Representative Joseph Cao, who on Tuesday told Hayward\’s colleague that even resignations from BP officials would not be sufficient to placate him.

"In the Asian culture we do things differently. During the samurai days, we just give you a knife and ask to you commit hara-kiri," he said.


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