OIL giant BP yesterday revealed it had reached a £2.5 billion ($4bn) settlement with its former partner on the ill-fated Deepwater Horizon drilling platform over claims related to last year's fatal explosion and oil spill in the Gulf of Mexico.

As a 25% partner in the Macondo well – and therefore on the hook for 25% of the costs of cleaning up the spill, compensating those affected and paying government fines – Anadarko Petroleum will pay BP $4bn under the terms of the agreement.

Although the settlement means BP gets far less than it might have won in court, it marks another step in the company’s journey to put the ill-fated events of the Deepwater Horizon disaster behind it.

At the same time, the deal may reduce the overall cost of the disaster for BP, for which the event has also been a public relations disaster.

While BP has given up around $5bn in potentially recoverable costs, Anadarko will now no longer pursue its allegations of gross negligence against BP, although the deal excludes possible US government fines the parties may yet have to pay. The settlement therefore removes a vocal and potentially damaging opponent from the field.

BP has said the total bill for the oil spill, including government fines, for which it has taken charges of $3.5bn and research grants of $500 million, will be $42bn, which suggests that Anadarko could have faced a total bill of up to $9.5bn.

Investors have priced in a final cost to the company from the spill that significantly exceeds BP’s estimate.

However, analysts say deals such as the one announced yesterday make the worst-case scenario – a final bill of more than $70bn – now look less likely.

Richard Griffith, oil analyst at Evolution Securities, said: “We maintain our view that the ultimate cost to BP could fall... substantially below the cost inferred by the share price fall since the accident.”

News of yesterday’s deal heartened investors, who initially sent BP’s share price up by almost 5%, before the stock ended the day up 2.2%, or 9.2p, at 425.6p.

BP shares have climbed significantly since their of around 304p in June 2010 – but there still remains a long way back to the peak of 655.4p it hit just before the April 20 explosion and fire aboard the Deepwater Horizon drilling platform, which killed 11 workers and dumped four million barrels of oil into the Gulf of Mexico.

A US federal report last month has blamed the worst oil spill in US history on “key mis-steps”, poor leadership and a poor cement job by BP and its contractors.

Nonetheless, yesterday’s deal marks further progress for BP’s long-suffering shareholders as well as ordinary Scots, because shares in the oil company form a significant chunk of most investment portfolios held by pension funds.

Payments from BP account for around one-seventh of all blue-chip dividends in the UK.

The return of BP’s dividend in February following its suspension last summer to help pay for the cleanup was regarded as a key development for pension holders, as well as investors, given that the stock previously accounted for an estimated one in every six pension pounds invested.

In May, BP agreed to accept $1.1bn from the third partner in Macondo, Mitsui & Co., to cover its 10% share of cleanup costs.

The company is still suing the companies it hired to help drill the well, Transocean and cement specialist Halliburton, to pay towards the cost of the spill.