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BP Sheds More Assets To Pay For Deepwater Horizon Disaster

Kinder Morgan has agreed to buy 15 fuel storage terminals from BP for $350 million in a deal that will help the British energy giant pay the damages and fines resulting from its role in the disastrous 2010 Deepwater Horizon oil spill in the Gulf of Mexico.

BP and Kinder Morgan, the Houston-based pipeline company, will jointly run 14 of the 15 terminals. The sale gives Kinder Morgan ownership of 75 percent of the assets and BP will control the remaining 25 percent. The 15th terminal will be wholly owned by Kinder Morgan.

The British oil company will also continue to use the terminals as distribution centers for its refined petroleum products.

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“By combining BP’s expertise in product trading and marketing with Kinder Morgan’s strength in operations and terminal development, the [joint venture] is well suited for growth opportunities in high-demand refined petroleum products markets,” John Schlosser, president of Kinder Morgan Terminals, said in a statement.

The deal also will help BP save money, according to Doug Sparkman, an executive at the British oil company. “[The transaction] enables BP to maintain strategic access to terminals nationwide, while reducing operating costs and complexity,” he said on Oct. 20, the day the deal was announced. The sale is expected to close in early 2016.

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The $350 million sale price and the savings in operating costs also will make it easier for BP to pay off the $53.8 billion liability that the company incurred from the spill, the worst oil disaster ever in U.S. waters. That includes $20.8 billion in fines due to the federal government for cleanup and restoration of the gulf and its coastline.

The Deepwater Horizon, a huge rig operating in the gulf off the coast of Louisiana, exploded on April 20, 2010, killing 11 workers and leaking an estimated 134 million gallons of crude oil into the gulf. The breach wasn’t capped until 87 days later.

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The 15 terminals involved in the deal – in the Midwest, the Northeast, the Southeast and on the West Coast – have a combined storage capacity of about 9.5 million barrels of refined products. BP still will retain control of additional terminals in five states, Indiana, Iowa, Oregon, New Jersey and Washington State.

The financial practices of Kinder Morgan and BP lately present a study in contrasts. Since the Deepwater Horizon spill, BP has been selling its properties to settle liabilities, costing the company one-fifth the earnings base it had before the 2010 disaster.

On the other hand, Kinder Morgan, already a major U.S. pipeline operator, has been growing. In 2014 it consolidated its various components into a single company. In July, it bought Royal Dutch Shell’s interest in a joint venture with Elba Liquefaction Co. in Georgia, and spent $3 billion to buy Hiland Partners, a pipeline and logistics concern.

By Andy Tully of Oilprice.com

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