'BP breached drilling contract'

TRANSOCEAN Ltd, seeking to avoid liability in the Gulf of Mexico spill trial, claimed BP plc misrepresented the amount of oil that gushed from its blown-out Macondo well, prolonging the catastrophe by 60 days.

The claim by BP's co-defendant came after the first week of a three-month trial, and one day after BP sought to bar the US government from seeing related communications with its lawyers.

The April 2010 blowout caused the Deepwater Horizon oil rig to explode, killing 11 workers.

Transocean, the rig's owner, claimed in a filing last Friday in New Orleans federal court that BP's misrepresentations of the spill-rate breached its drilling contract. The US, meanwhile, wants some BP lawyer files that are tied to the UK-based company's spill-rate calculations.

BP's liability in the case will turn in part on the size of the offshore spill, the worst in US history, and whether its conduct was negligent or grossly negligent. If the latter is determined by the judge, the company may be liable to the US for as much as US$17.6 billion (RM53 billion) and unspecified punitive damages to claimants not part of an US$8.5 billion civil accord last year.

For Transocean and Halliburton Co, which was responsible for cement services at the well, a similar finding in the trial would mean they could face punitive damage awards.

Also last Friday, the US Court of Appeals in New Orleans reversed a decision by US District Judge Carl Barbier barring BP from using US$750 million of Transocean's insurance coverage to pay costs from the spill. Barbier had ruled that the drilling contract between the companies for the Macondo well precluded BP from seeking coverage under the Transocean policies for pollution-related liabilities.

BP is in negotiations to settle the civil case with the US and Gulf states affected by spill, according to a person familiar with the situation. BP pleaded guilty last year to 14 criminal counts, including one charge of lying to Congress about the size of the spill. The company agreed to pay US$4 billion in fines and penalties.

Transocean, in last Friday's filing, is seeking to avoid liability by placing the blame on BP. During the accident, BP recommended a series of well-control measures to US regulators that were prioritised in part on BP's estimates of how much oil and gas was flowing from the well. BP's allegedly faulty estimates caused workers to attempt a so-called "top kill" plan, which failed, before they implemented an alternative plan that ultimately succeeded in stopping the well, Transocean said.

"Had the alternative source control approach - known as the BOP-on-BOP - been attempted instead of the doomed top kill effort, the well could have been capped in mid-May, rather than in mid-July," Transocean's lawyers said in the filing. "In short, BP's tortuous and criminal conduct caused the oil spill to last for two months longer than necessary."

Scott Dean, a spokesman for BP, declined to comment on the case.

Wyn Hornbuckle, a spokesman for the Justice Department, declined to comment on Transocean's filing.

But in an email last Friday, he pointed to BP's guilty plea where the company admitted that a senior executive publicly downplayed flow-rate estimates at 1,000 to 5,000 barrels a day while having access to "significantly higher" calculations generated internally by BP's engineers. Bloomberg