A Guide To How BP Will Spend $38 Billion On The Oil Spill

Two impressive figures: $38.5 billion and $41.6 billion.

The first is how much Citigroup thinks BP will ultimately spend on the oil spill. The second is an estimate for BP’s cashflow in 2011 (via FT Alphaville). In other words, BP will have enough cash to pay for the disaster, but it will be painful.

BP’s biggest estimated cost is damages — those thousands upon thousands of lawsuits — followed by EPA fines. Stopping the leak is comparatively cheap at $0.5 billion.

Here’s Citi’s ‘Costometer’:


Citi acknowledges a large degree of uncertainty in these numbers, especially for EPA fines:

As far as clean water fines are concerned, we are in new territory since the largest fine the EPA has handed out to date was $34m to Colonial Pipelines in 2003. The often-quoted penalty range is $1,100-4,300 per barrel spilled. However, the EPA has a certain amount of discretion around this range and the Colonial Pipelines fine was below $1,000/barrel. In our ‘Costometer’, we have assumed BP is penalised at c$3,500 per barrel spilled.

And here’s BP’s cashflow


Don’t miss: 20 Things You Should Know Before You’re Even Tempted To Invest In BP

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.