BP agrees to settle $18.7 billion claims over 2010 Mexico oil spill; largest settlement in American history

London: British energy giant BP on Friday, announced it had agreed to settle US federal and state claims worth up to USD 18.7 billion over the 2010 Gulf of Mexico oil spill.

"With this agreement we provide a path to closure for BP and the Gulf," said BP chairman Carl-Henric Svanberg.

The agreement increases the pre-tax cost of the disaster to BP by an estimated USD 10 billion to USD 53.8 billion, the company said, adding that a final figure would be released in its second quarter results due later this month.

"This is a realistic outcome which provides clarity and certainty for all parties," BP group chief executive Bob Dudley added in a statement. "For BP, this agreement will resolve the largest liabilities remaining from the tragic accident and enable BP to focus on safely delivering the energy the world needs."

The deal has been struck with the US federal government and five Gulf Coast states -- Alabama, Florida, Louisiana, Mississippi and Texas -- affected by the explosion on the Deepwater Horizon drilling rig.

Eleven people died and millions of barrels of oil were spilled into the Gulf, decimating wildlife and devastating the ecology of a region dependent on the seafood and tourism industries.

The settlement, to be paid out by BP's US upstream subsidiary, BP Exploration and Production Inc, includes $5.5 billion to the US as a civil penalty under the Clean Water Act.

A further USD 7.1 billion will be paid to the US and Gulf Coast states over 15 years for natural resource damages, in addition to USD 1 billion already committed. Another USD 4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states. And up to USD 1 billion will be paid to resolve claims made by more than 400 local government entities.

The head of the US Justice Department, Attorney General Loretta Lynch, hailed what she said was a record deal. "If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come," she said in a statement.