BP cuts oil spill burden with $1.1 billion Mitsui deal

LONDON (Reuters) - BP <:BP.LO:> struck a key victory in its battle to share the cost of the Gulf of Mexico oil spill when partner Mitsui & Co agreed on Friday to pay $1.1 billion toward the clean-up bill and possibly billions more in fines.

Japanese trading house Mitsui's <8031.T> exploration unit MOEX owned 10 percent of the Macondo well but had sought to avoid paying its share of the costs, claiming BP's negligence exempted it from this obligation.

MOEX has dropped this claim and analysts said this weakened the case of 25 percent well shareholder Anadarko Petroleum , which has also invoked the same argument.

"This is the first recognition by one of the partners that actually...blame is shared and should be shared and therefore the costs should be shared as well," Societe Generale analyst Irene Himona said.

"It is very significant because clearly now it means that BP can try and ensure that everybody else who is involved will also meet their obligations," she added.

By 1337 GMT BP's shares were up 2.3 percent against a 0.8 percent rise in the STOXX Europe 600 Oil and Gas index <.SXEP>.

Analysts said MOEX's decision to abandon its claim not only meant BP will not face potentially massive civil fines alone, but also highlighted possible weaknesses in the argument of gross negligence. That could suggest that the U.S. government will struggle to prove it.

"That Mitsui should have elected to pay will thus likely be seen by the market as a statement from a closely involved industry player that it does not believe that claims that BP was guilty of gross negligence are likely to be upheld," analysts at Deutsche Bank said in a research note.

BP has estimated the cost of capping the well, cleaning up the damage from America's largest ever offshore oil spill and compensating those affected will be over $41 billion, including what analysts estimate will be around $4-5 billion in fines.

Mitsui's payment covers its contribution toward the cost of capping the well, cleaning up the oil and compensating those affected. Hence, the Japanese company is paying less than a third of its potential liability for these elements.

On this basis, Anadarko could be liable for almost $2.7 billion, toward these elements of the total cost.

However, one source close to the matter said BP was likely to seek a higher rate of recovery from Anadarko than it received from Mitsui, which did not have a direct liability to pay since it invested through MOEX, which had few assets.

Anadarko on the other hand does have a direct legal liability as it has invested directly in the well.

"Anadarko, BP's other partner in the Macondo license is likely to come under pressure to settle as well now," said Richard Griffith at Evolution Securities.

Anadarko Chief Executive Jim Hackett said earlier this month he would be prepared to come to the table and settle "under the right circumstances.

MOEX remains on the hook for its share of any fines, penalties or punitive damages levied on the project. In a worst case scenario, these could double BP's $41 billion estimate and MOEX would likely have to pay 10 percent of these.

MOEX has now joined BP in blaming the accident principally on Transocean , the company which BP hired to drill the well, under BP's instruction. BP has sought to extract the full cost of the disaster from the Swiss-based driller.

Transocean's contract with BP indemnifies it against environmental damage but if BP can prove gross negligence or that the Deepwater Horizon drilling rig was unseaworthy, it could overrule this indemnity.

The Commission appointed by President Barack Obama to investigate the rig blast which led to the United States's worst ever spill found BP and its contractors, Transocean, and cement specialist Halliburton , had all made mistakes but added that BP was responsible for more mistakes than the others.

Mitsui said it had no plan to change its forecast net profit or dividend in 2011/2012 after the settlement. (Additional reporting by Sarah Young)

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