BP (LSE: BP.L - news) is to face the second round of its legal trial over the Gulf of Mexico oil spill this week which could leave it with an $18bn (£12bn) fine as it fights claims that it could have capped the biggest offshore spill in US history earlier.
The figure is more than five times the $3.5bn BP has put aside to settle the case which has been hanging over the company since 2010 when the explosion of the Deepwater Horizon oil platform triggered the biggest marine disaster in US history.
Investors are now concerned that BP will be obliged to announce further provisions at its next quarterly update.
The explosion killed 11 men and left miles of Louisiana coastline affected by oil. The cost of the damage to the areas tourism and fishing industries has been put in the billions of dollars.
The disaster has triggered a slew of legal battles in America, where politicians are keen to make BP “pay” for its part in the disaster.
In March last year, the energy giant struck a deal to compensate victims which it expected to result in $7.8bn (£5.2bn) of payouts.
However, it has been forced to revise that figure upwards following tens of thousands of claims. BP is now challenging the administrators, who it claims are not honouring the intentions of the original compensation agreement.
Last spring, BP faced a seven-week legal battle over how the blame for the spill should be divided between the oil company, and its US contractors Transocean (NYSE: RIG - news) and Haliburton. The case was the first of three phases.
The second phase, which is due to begin on Monday and last for a month, will spend the first week looking at whether BP could and should have sealed the spewing oil well sooner. The remainder of the case will focus on how much oil was spilled.
The US government claims that 4.9m barrels of oil were released a figure it settled on soon after the Deepwater explosion. The oil company says the number is 3.26m.
BP argues that the oil did not flow out at a steady rate, but rather started slowly and accelarated as it gradually eroded and enlarged the cavity it was flowing through.
It also disputes the way the US Government reached its figure. “United States experts employ unproven methods that require significant assumptions and extrapolations in lieu of . . . available data and other evidence,” BP said in a filing.
The US government argues that BP was not transparent about how much oil was spilled which had a knock-on effect on how long the oil was allowed to flow and the subsequent damage to the waters off Louisiana.
BP rejects this and is seeking to convince Judge Barbier, who is presiding over the case, that it should be charged with “negligence” rather than “gross negligence”. The latter would leave BP open to much higher fines.
The company and its shareholders still face a considerable wait before they find out how much money it will need to pay. Judge Barbier, who was formerly an admiralty lawyer for the US government, is not obliged to stick to any timetable before delivering his verdict.
He is expected to announce the outcome of the first two phases of the trial by early next year.
The third phase of the trail will be the penalty phase which will determine the size of BP’s fine.