Obama and BP set for oil spill showdown
BP executives will also be grilled by U.S. lawmakers at hearings this week.
Mon, Jun 14, 2010 at 10:02 AM
DAMAGE CONTROL: President Barack Obama is expected to press BP to set up an escrow account to pay damage claims. (Photo: ZUMA Press)
WASHINGTON/LONDON - Barack Obama and top BP executives are set for a showdown over the Gulf of Mexico oil spill this week, as the likely damages bill piles more pressure on the oil giant's shares.
With America's largest-ever environmental disaster nearing the two-month mark, the president will press BP Chairman Carl-Henric Svanberg at their first meeting on Wednesday to set up an escrow account to pay damage claims by individuals and businesses hurt by the oil spill disaster.
BP executives will also be grilled by U.S. lawmakers at congressional committee hearings on Tuesday and Thursday.
The oil giant may face criticism from its peers at the Tuesday hearing, where representatives of Exxon Mobil, Royal Dutch Shell, Chevron and ConocoPhillips will also testify.
Chevron's chief executive said in an interview with the Wall Street Journal published on Monday that the accident was "preventable" and a deputy said if BP had used best practice in the well design the accident would not have happened.
The newspaper said the message was likely to be echoed by other executives at the Tuesday hearing.
"If they say that, it would definitely be damaging for BP," Evgeny Solovyov, analyst at Societe Generale in London said.
The crisis enters its 56th day on Monday as Obama makes his fourth trip to the Gulf — visiting Alabama, Mississippi and Florida for the first time since the well blew out.
He will stay overnight in the region on Monday and return to Washington on Tuesday and make a nationally televised address at 8 p.m EDT.
After being briefed on Monday morning by Coast Guard Admiral Thad Allen, his point person on relief efforts, Obama will host a round-table discussion and meet local residents in Gulfport, Miss.
Obama then plans to travel to Theodore, Ala., where he will see how the clean-up operations are going before traveling by ferry in Alabama from Dauphin Island to Fort Morgan. He will spend the night in Pensacola, Fla., home to some of America's most famous beaches.
Millions of gallons of oil have poured into the Gulf since an April 20 offshore rig blast killed 11 workers and blew out the well.
Obama also will call for an independent panel to administer compensation payments and to ensure cash is disbursed in a timely fashion when he meets Svanberg and other BP officials at the White House on Wednesday.
Senate Democrats have written to BP urging it to make a $20 billion initial deposit to such a fund as a good-faith showing that they will not shirk their responsibility.
BP shares continue to fall
BP declined to comment on the proposals to create an arms-length oil spill damages fund.
Some dealers said the establishment of such a fund could help draw a line under the crisis but others fear it could equate to giving the U.S. administration a blank check.
The White House has already demanded BP pay lost wages to those laid off due to the six-month ban the government imposed on deepwater drilling following the accident.
BP doesn't think it should have to pay what it sees as the cost of a policy decision.
The company's shares traded down 5.3 percent, against a flat European oil and gas sector, at 1239 GMT. The company has lost over 40 percent of its market value since the crisis began.
BP's board meets on Monday and while the dividend — which U.S. politicians have called on the company to cancel — is expected to be discussed, no decision is likely to be made this week, a spokeswoman said.
A source told Reuters on Sunday BP was not planning to scrap the dividend, currently valued at about $10.5 billion annually but was considering deferring it, paying it in shares or paying into a ring-fenced account for investors.
The stock dividend is a big deal in Britain because BP accounts for 12 percent of all dividends paid by UK companies.
Obama on defensive
Oysterman Marko Dekovic, who has been unable to fish for three weeks, said fishermen in southern Louisiana feel caught in the middle between BP and the Obama administration.
"Just fix the problem," 24-year-old Dekovic said. "Everything depends on oysters. If you don't make any money on that you lose your house and everything else."
The crisis has put Obama on the defensive and distracted his team from the domestic agenda — a new energy policy, reform of Wall Street and bolstering a struggling American economy.
People in the Gulf of Mexico are frustrated with BP for the spill but also at Obama's drilling moratorium because many families have members who work in oil and others who fish.
The disaster comes ahead of November's congressional elections in which Democrats are expected to struggle to keep majorities in the House of Representatives and Senate.
BP placed a containment cap on its blown-out seabed well this month after a series of failures to stem the flow but oil continues to gush.
Allen said the partly contained leak was likely leaking about 35,000 barrels (1.47 million gallons/5.57 million liters) a day.
BP expects its cost for the cleanup to be $3 billion to $6 billion. Many analysts expect a higher cost. The company said on Monday it had spent $1.6 billion so far and had committed another $300 million to build offshore barriers in Louisiana.
(Additional reporting by Jeffrey Jones in Louisiana, Tom Bergin, Adrian Croft and Julie Crust in London and Caren Bohan in Washington; Writing by Tom Bergin and Mark Egan; Editing by Philip Barbara and Erica Billingham)
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