LONDON (AFP) - British energy giant BP said Thursday it had agreed to pay a record US$18.7 billion (S$25.2 billion) to compensate the US government and five states for damages stemming from the deadly 2010 Gulf of Mexico oil spill.
The spill was sparked by an explosion on the Deepwater Horizon rig, which killed 11 men.
Millions of barrels of oil flowed into Gulf waters, in one of the worst environmental disasters to strike the United States.
It took 87 days to cap BP's runaway well - some 1,500m below sea level off the coast of Louisiana.
Beaches were blackened in five states and the region's tourism and fishing industries were crippled in a tragedy that riveted the nation.
BP's share price closed up 4 per cent at 437.40 pence following the announcement, which was welcomed by the US government.
Attorney-General Loretta Lynch said it would take several months to finalise the deal.
"The board has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future," said BP chairman Carl-Henric Svanberg.
"With this agreement, we provide a path to closure for BP and the Gulf."
The deal has been struck with the US federal government, the Gulf Coast states of Alabama, Florida, Louisiana, Mississippi and Texas and more than 400 local governments whose economies were badly hit by the disaster.
The settlement increases the pre-tax cost to BP of the Deepwater Horizon explosion in April 2010 by an estimated US$10 billion to US$53.8 billion, the company said.
"This is a realistic outcome which provides clarity and certainty for all parties," said BP group chief executive Bob Dudley.
"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."
Lynch said the US Justice Department had been "fully committed to holding BP accountable, to achieving justice for the American people and to restoring the environment and the economy of the Gulf region."
If approved by a court, the settlement "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 added.
"This settlement would be the largest settlement with a single entity in American history."
DEAL 'DRAWS LINE IN SAND'
The settlement, to be enacted by BP's US upstream subsidiary, BP Exploration and Production Inc, includes US$5.5 billion to be paid to the US over 15 years as a civil penalty under the Clean Water Act.
A further US$7.1 billion will be paid to the US and Gulf Coast states over 15 years for natural resource damages, in addition to US$1 billion already committed.
BP will also set aside US$232 million to cover any further, unforeseen damages at the end of the payment period.
Another US$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 US$1 billion will be paid to resolve claims made by more than 400 local government entities.
Louisiana Governor Bobby Jindal said the agreement would "not only restore the damage inflicted on our coastal resources by the Deepwater Horizon oil spill - it will also allow Louisiana to continue aggressively fighting coastal erosion."
BP, which owned 65 per cent of the Macondo drilling site being tapped by the Deepwater rig, has been forced to sell off billions of dollars of assets and cut jobs to meet the clean-up bill.
It has also been hard hit in recent months by plunging oil prices, prompting speculation of a possible takeover.
BP chief financial officer Brian Gilvary said the payments would be spread out over many years, averaging at a "manageable" rate of about US$1.1 billion a year.
Biraj Borkhataria, an analyst at RBC Capital Markets, said the deal "should finally draw a line in the sand on Macondo for BP, which should result in renewed investor interest in the name".