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Mitsui’s MOEX Withholds $480 Million Costs From BP

The BP Plc Macondo well site
The Transocean Development Driller III, right, works to drill the primary relief well at the BP Plc Macondo well site in the Gulf of Mexico off the coast of Louisiana. Photographer: Derick E. Hingle/Bloomberg

Mitsui & Co.’s subsidiary MOEX Offshore 2007 LLC, which holds a stake in BP Plc’s crippled Gulf of Mexico oil well, hasn’t paid $480 million in bills from BP for cleaning up the worst oil spill in U.S. history.

Japan’s second-biggest trading house expects the unit to get more bills from BP, Chief Financial Officer Junichi Matsumoto said at a press conference in Tokyo today, when he announced a 79 percent gain in first-quarter earnings. The company “will study and determine whether or not it should pay,” Matsumoto said.

Robert Dudley, who will become BP’s chief executive officer Oct. 1, promised to “vigorously” pursue its partners for costs as the company booked a pretax charge of $32.2 billion related to the leak. Mitsui’s shares have slumped about 24 percent since the April 20 explosion on the BP-leased Deepwater Horizon rig killed 11 workers and triggered the disaster.

“In months to come, there still remains the possibility of more lawsuits from the BP spill,” said Winston Barnes, head of sales and trading for Asian markets at WJB Capital Group Inc. in San Francisco. “Mitsui’s earnings numbers look good, but when it comes to the stock price, it’s a tad discounted.”

Mitsui owns 70 percent of Mitsui Oil Exploration Co., which holds 10 percent of the field where the Macondo well is located through wholly owned U.S. subsidiary MOEX Offshore, according to the website of Mitsui Oil.

Withholding Payments

Anadarko Petroleum Corp., which holds a 25 percent share in the well, said BP’s actions caused the spill, and both Anadarko and MOEX Offshore have said they are withholding payments of spill costs.

“Under the joint operating agreement, no party is required to pay any costs or damages to the operator to the extent that they are incurred as a result of the operator’s gross negligence or willful misconduct,” Anadarko’s Chief Executive Officer Jim Hackett said in testimony prepared for a U.S. Senate subcommittee last month.

MOEX Offshore President Naoki Ishii said in testimony that government approvals for BP’s drilling plan were in place and operations had started before the Mitsui unit invested in the project. His company had no reason to doubt the “sufficiency or competency” of the plan, Ishii said.

BP’s Macondo well released 4.1 million barrels of oil into the Gulf of Mexico before it was capped July 15, a team of U.S. government-appointed scientists said yesterday. That’s about 16 times the amount leaked in the 1989 Exxon Valdez disaster and makes it the world’s biggest accidental offshore spill.

‘Static Kill’

Later today, BP will start injecting drilling mud, a procedure known as a “static kill,” as part of efforts to permanently seal the well.

Mitsui recorded an asset writedown of 2.1 billion yen including an unspecified valuation loss of its unit’s mining right in the Mississippi Canyon 252 block where BP’s Macondo well is located, Mitsui said in today’s statement.

Mitsui’s net income increased to 102.5 billion yen ($1.2 billion) in the quarter ended June 30 from 57.3 billion yen a year earlier, the Tokyo-based company said today. Revenue rose 8.9 percent to 2.43 trillion yen.

“First-quarter profit was far better than earlier expected and attracted investors and traders,” said Masayuki Nagano, an analyst at Deutsche Securities Inc. in Tokyo.

Mitsui’s shares rose 4.4 percent, the biggest jump since June 21, and closed at 1,158 yen in Tokyo. The benchmark Topix index advanced 1 percent.

Mitsui maintained its full-year profit outlook at 320 billion yen for the year ending March 2011 as earnings benefit from a surge in the price of iron ore, used in making steel. Mitsui owns stakes in iron ore projects in countries from Australia to Brazil.

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