Monday, June 07, 2010

BP's Crude Solution

BP is capturing more than half the oil spewing from the well and when its current effort is in high gear, it might catch ninety percent of the escaping oil.

BP Increases Oil-Capture Rate; U.S. Braces for Siege

June 6 (Bloomberg) -- BP Plc said it is capturing more of the oil spewing into the Gulf of Mexico from its damaged well as U.S. officials said they expect the battle against pollution from the disaster to continue for months.

“This is a siege across the entire Gulf,” U.S. Coast Guard Admiral Thad Allen said on CBS’s “Face the Nation” broadcast today. “There will be oil out there for months to come. This will be well into the fall.”

BP said it captured 10,500 barrels of oil from its leaking well yesterday, up from 6,077 barrels in the previous 24-hour ending at midnight June 4. The well was estimated by government scientists to be gushing 12,000 to 19,000 barrels a day. The spill is the worst oil spill in U.S. history.

A “cap” over the well is capturing “probably the vast majority” of the leaking oil, Chief Executive Officer Tony Hayward told the British Broadcasting Corp. today in an interview in London. BP is preparing a second system to capture even more oil that will be implemented within the week, he said. BP plans to swap out those temporary systems with one that is more hurricane-proof by the end of the month.

The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet (1,524 meters) of water.

Oil Ashore

Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, according to Allen. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida.

The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday.

Oil that washed ashore on beaches in Florida’s northwest Panhandle region was quickly removed, and crews are attacking tar balls that are left on the sand, Florida Governor Charlie Crist said on CNN’s “State of the Union” broadcast. A cleanup command post has been set up in Pensacola, he said.

More oil is expected to arrive in northwest Florida within the next three days, according to a statement today from the Florida Deepwater Horizon Response team, which cited National Oceanic and Atmospheric Administration forecasts.

Slow Payments

Mississippi Governor Haley Barbour said state beaches remained clear of tar balls or other deposits, though he fears tourists will still stay away because they think the coast from Florida to Texas is “ankle-deep in oil.”

Both Crist and Allen faulted BP for taking too long to compensate businesses and workers for losses tied to the oil.

“We want these claims to be responded to much more quickly,” said Crist said on CNN. “These people need help. And we have to be there to try to make them as whole as we can during this very difficult process.”

President Barack Obama’s moratorium on offshore drilling, which has idled 33 deepwater rigs in the Gulf of Mexico, will cost as many as 6,000 jobs this month and 20,000 by the end of next year, Louisiana Governor Bobby Jindal said in a letter to Obama on June 2.

Lost Livelihoods

Mississippi Governor Haley Barbour today endorsed the call by Jindal to resume offshore drilling in the Gulf, which produces 30 percent of all U.S. oil and gas. If not, rigs in the region will be moved to oil fields overseas, further delaying the resumption of drilling in the Gulf, he said.

Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost.

BP has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation before it can pay the remaining claims, he said. Willis said the company’s spending on claims through June may top $84 million.

BP said it will continue to try increasing the amount of oil it is capturing with its latest containment system.

Still Leaking

“I’d like to see us capture 90-plus percent of this flow,” Doug Suttles, BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.”

The oil is funneled to a drillship at the surface that can capture and separate as much as 15,000 barrels of oil, gas and water a day, Kent Wells, a BP senior vice president, said in a conference call with reporters last week.

Jagged edges left when the pipe was cut for the containment cap may prevent a tight seal and allow some oil to continue leaking, Allen said. Government scientists expected the cut, which removed a kink in the pipe, to increase the flow of oil by as much as 20 percent.

“History has taught us to be cautiously optimistic, not overly optimistic,” Dan Pickering, an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said. Capturing 90 percent of the flow would be a “huge home run,” he said.

Kuwait Investment Authority, the country’s sovereign wealth fund, isn’t considering selling its 1.75 percent stake in BP and believes there is no threat to the company’s future as a result of the spill, the Al-Rai newspaper reported today.

‘First Call’

Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.”

Allen said relief-well operations to stop the leak permanently will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.”

“In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.”

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