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Why Oil Is Still Underpriced

Why Oil Is Still Underpriced

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BP Getting Back in the Gulf

Just two weeks after the US government lifted a 16-month ban on new federal contracts for BP Plc, the company placed the winning bid on Wednesday for 24 contracts of exploration and production leases in the Gulf of Mexico.

BP submitted 31 bids in the sale and was the highest bidder on 24 tracts for $41.6 million, aided by the timey lifting of a ban put in place by the Environmental Protection Agency (EPA) in late 2012 for “lack of business integrity” over the 2010 Gulf of Mexico oil spill.

The 2010 spill at the Deepwater Horizon drilling rig killed 11 workers and sent millions of barrels of oil into the Gulf in the worst oil spill in US history.

BP had sued over the EPA ban, claiming it was unfairly penalized.

At the same time, having reached its last target for renewable energy investment in 2013, BP is foregoing any new clean energy investment targets as it nurses some $42 billion in payouts over the 2010 oil spill.

Related Article: Is it Time to Let BP back in the U.S. Oil Game?

BP invested $8.3 billion in renewable energy between 2005 and 2014—a year ahead of target— but has scrapped some additional renewable energy projects and won’t be setting any new investment goals in the sector for now, Bloomberg reports, citing a new BP sustainability report.

Earlier this month, a US court ordered BP to restart payments from its $9.2 billion compensation fund, rejecting the company’s bid to block business from recovering money over the oil spill even if they failed to explicitly trace their economic losses to the disaster.

In an effort to offset costs related to the spill, BP put up $3.1 billion in wind farms for sale in 2013, and the year before, it scrapped a $300 million cellulosic ethanol refinery project in Florida. In 2011, BP closed down its solar power business, but will retain its biofuel research projects.

“The financial commitment we made in 2005 has allowed us to cast a wide net in search of businesses that could be financially self-sustaining, and a good fit for BP. Our biofuels business fits the bill,” Bloomberg quoted Phil New, BP chief executive officer of alternative energy, as saying.

By Charles Kennedy of Oilprice.com



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