Oil Firms Eye New Insurance Fund

U.S. oil explorers are talking about forming a new insurance fund that would cover the costs of any future oil spill in order to avoid a scenario where smaller companies are unable to drill offshore.

BP’s oil spill is expected to rack up an over $30 billion bill for shutting the leak, cleaning up the oil and compensating those affected.

This has prompted concerns about what would have happened if a company without BP’s resources had been operating the well.

Jim Farnsworth, chief executive of Cobalt International, a small explorer, said his company is in talks to avert such fears. “It is likely and probably desirable for a combination of us to come together and insure against these types of accidents,” he told the Finding Petroleum conference in London. “Cobalt is actively in discussions along those lines,” he added.

Some analysts have predicted that the oil spill could force smaller companies to sell because insurance coverage may be either unobtainable or unaffordable.

In the wake of Exxon’s Valdez oil spill, companies formed a $1 billion fund. Farnsworth said he expects the new fund to be bigger.

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