UPDATE 1-BP faces escalating spill payouts after court ruling

By Andrew Callus

LONDON, March 7 (Reuters) - BP must keep payingcertain types of oil spill compensation in much larger amountsand to more parties than it was expecting, according to a courtruling which could add billions to its final bill.

The March 5 ruling, made by the New Orleans court where BPis battling to keep a lid on other fines and penalties, wasoutlined in the company's annual report.

The decision applies to payments made as part of asettlement stemming from the Deepwater Horizon oil spill in theGulf of Mexico in 2010 which BP has already agreed, but wherethe actual amount is uncapped.

BP had earmarked $8.5 billion for payments which includedclaims for "Economic and Property Damages".

BP said it would appeal the ruling, which upheld the payoutadministrator's interpretation of the settlement, and which hasresulted in more and larger payouts than BP had expected.

"BP strongly disagrees with the ruling of 5 March 2013 andthe current implementation of the agreement by the claimsadministrator," it said.

"BP intends to pursue all available legal options, includingrights of appeal, to challenge this ruling."

BP also removed about $800 million from its $8.5 billionestimate for compensation claims under this part of its $42.2billion of total spill provisions so far.

Far from signalling a lower potential final bill, however,BP said the reduction reflects "the inherent uncertainty thatexists... (over) the higher number of claims received and higheraverage claims payments than previously assumed".

BP said even if it wins its appeal, its final bill for thistype of compensation will be much higher, because claims not yetreceived or processed are not reflected in its current estimate,and because the average payments per claim determined so far arehigher than anticipated.

"If BP is not successful in its challenge to the court'sruling, a further significant increase to the total estimatedcost of the Settlements will be required," it said.

The higher rate of payments were earlier flagged by BP inits fourth quarter results, and it has raised its estimate ofpayouts in each of the past two quarters, taking it to $8.5billion from an initial $7.8 billion.

BP believes the way in which the claims administrator isimplementing the settlement agreement with respect to businesseconomic loss claims is contrary to the agreement.