HOUSTON -(Dow Jones)- BP PLC's (BP) contract to operate the leaking Macondo well contains a clause that could limit the liability of
minority partner Anadarko Petroleum Corp. (APC), a person familiar with
the agreement said.The contract, the person said, is similar to others
used in offshore drilling in which the operator assumes the cost of
mistakes in case of gross negligence, the person said.Anadarko, which
owns 25% of the well, has seen its shares hit hard in recent weeks as
investors brace for the possibility that the Houston-based company could
be on the hook for a proportional share of the costs resulting from the
leak--an amount that could reach tens of billions of dollars. The
confirmation that the joint operating agreement with BP contains a gross
negligence clause could substantially reduce the company's potential
liability andthatoffellow minority partner Mitsui & Co. Ltd.
(8031.TO).BP
could be liable for 100% of damages if gross negligence is
proven, said Jacqueline Weaver, who teaches energy law at the University
of Houston Law Center. U.S. lawmakers said this week that BP made
decisions that increased the risk of a blow-out at the well to save the
company time or expense. BP didn't immediately respond to requests for
comment.The uncertainty about Anadarko's liability underscores the
unprecedented nature of the crisis that began in April, when a
Transocean Ltd. (RIG) drilling for BP in the U.S. Gulf exploded and
sank, unleashing the largest offshore spill the country has ever seen.
BP so far has spent more than $1.6 billion dollars in cleaning up the
spill, and its ultimate liability could be much higher. On Wednesday,
the company agreed to establish a $20 billion escrow account to pay for
damages.

Anadarko said Wednesday it had been invoiced by BP for its share of clean-up costs, although it didn't disclose the amount.Analysts with investment bank UBS estimate that the total cost of
the operation could reach between $20 billion and $50 billion, a figure
based on what Exxon Mobil Corp. (XOM) paid for the 1989 Exxon Valdez
spill. But the analysts said that if Anadarko ends up paying a quarter
of that cost, it could survive.

If Anadarko's liability comes in at the low end of the range, or $5 billion, the company could "easily" afford it, UBS analyst William Featherston said. Anadarko
currently has $3.7 billion in cash and an unused credit capacity of $
1.3 billion. Additionally, it has assets that are not producing cash in
the onshore U.S. and offshore Africa with an estimated value of $14
billion.If
the price tag is larger than that, Anadarko would have to
issue equity and sell a large percentage of its international and U.S.
Gulf of Mexico nonproducing discoveries. But even if it had to pay $12.5
billion, the company will be able to bear the financial burden,
Featherston said.

Investors have been bracing for a worse outcome than what analysts have imagined. Anadarko's shares have tumbled 40%
since April 20, the day the rig exploded. The decline sharpened last
week--Anadarko was down 19% on Wednesday alone--in a move that Barclays
Capital analysts said was "disproportionate" to the highest amount of
money Anadarko could be liable for. The stock was trading Wednesday
afternoon at $42.70, down 4.5% from the previous session. BP has said it
won't be limited by the $75 million cap on oil spill economic damages
established under the Oil Pollution Act of 1990 and that it won't seek
reimbursement from a federal trust fund. But Anadarko has refrained from
openly joining BP in that stance: Spokesman John Christiansen said in
an emailed statement that the company will do what is "right" and that
questions regarding itsliabilitywillbe answered "at the appropriate
time."