New cap test to stem Gulf oil flow delayed
BP on Tuesday delayed a critical test that will determine if it can close a cap atop its ruptured Macondo well that has leaked oil into the Gulf of Mexico for the last 12 weeks.
The British energy giant and US authorities said they were postponing the test that had been scheduled for Tuesday to establish whether the well can withstand the pressure caused by closing the cap at the wellhead.
“We decided that the process may benefit from additional analysis that will be performed tonight and tomorrow,” retired Coast Guard Admiral Thad Allen, who is overseeing the US response to the spill, said in a statement.
The tests, due to last between six and 48 hours, had been scheduled for late Tuesday on BP’s newly installed “capping stack,” which has a better seal than the last cap placed on the well and aims to stop oil from spewing out of the failed blowout preventer.
Neither the coast guard nor BP gave any indication about when the tests might now begin.
If the cap, which was put in place on Monday, is not sealed, BP intends to contain the whole of the oil flow by mid-July by siphoning it off through pipes to ships at the surface, Allen had said earlier.
Such developments are keenly eyed by investors as BP’s ultimate costs for the massive environmental disaster will likely hinge on how much oil is determined to have flowed freely into the Gulf.
As the oil giant prepared for a potential turning point in the worst offshore spill in US history, it said its plans to sell some non-core assets, which will help pay for a $20-billion clean-up fund, were moving forward.
Both pieces of news had helped BP shares maintain their recent recovery in London, although they see-sawed in New York with profit-taking erasing most of the early gains.
The only proven way to permanently kill the leak lies in the drilling of relief wells to intercept the ruptured one. The first of two such wells started in May is expected to intercept it by the end of July and plug it with drilling mud and cement by mid-August
US Interior Secretary Ken Salazar said in a memorandum that problems were identified “in recent weeks” with blowout preventers on BP’s relief wells.
The blowout preventers passed new tests after the problems were fixed, said Nicholas Pardi, a spokesman for the Bureau of Ocean Energy Management, Regulation and Enforcement.
“We are in discussions with a number of companies about a number of assets,” BP spokesperson Sheila Williams said in London, declining to give details. “Talks are going well.”
In Dubai, Abu Dhabi Crown Prince Sheikh Mohammed bin Zayed al-Nahayan said the emirate was considering investing in BP.
“We are still thinking about it,” Bloomberg quoted him as saying when asked about buying a stake in the firm.
BP chief executive Tony Hayward visited Abu Dhabi last week and met with the sovereign wealth fund, the Abu Dhabi Investment Authority (ADIA).
BP divested a small non-core downstream asset on Tuesday, selling Magellan Midstream Partners LP, its crude oil storage tanks in Cushing, Oklahoma and related petroleum pipelines for $289-million.
Williams said the sale, in the works since February, is not part of BP’s plan to unload $10-billion in non-core upstream assets to help pay for the cost of the Macondo cleanup.
The recent focus on divestments highlighted just how much of a pounding BP shares have taken, since the firm’s net asset value is around $80-billion more than its market value, said analyst Jason Kenney at ING in Edinburgh.
About seven non-core assets—including some in Alaska, Colombia, Venezuela and Vietnam—could be worth $45 to 50-billion, he said.
In London BP shares ended up about 2,9%. But in New York, profit-taking set in around midday. The shares closed up marginally at $36,88.
“Let’s not forget the stock was $28 six or seven days ago,” said Robert Lutts, chief investment officer at Cabot Money Management in Salem, Mass. “It was overbought shorter term relative to the potentially improving fundamental situation.”
The US shares have advanced about 36% since the stock collapsed to a low at the end of June.
Flow could be stopped
BP’s leaking wellhead is a 1.6km underwater. The new 73-tonne capping stack installed on Monday was custom-designed and built for the leaking well.
Even if the new cap fails, BP will have the ability to siphon up to 80 000 barrels per day of oil from the blown-out well by mid-July and either burn it or store it aboard vessels on the surface, Allen said.
“Either through a potential shut-in of the well or being able to produce most if not all of the flow that is generated, either way, we will have a way to contain the oil,” he said.
Kent Wells, senior vice president of exploration and production, said BP and government scientists would monitor the cap once the tests got under way at “very minute intervals.”
If tests progress as hoped, BP said no oil would flow from the well for the first time since a rig being drilled for BP by Transocean sank days after the explosion on April 20 that killed 11 workers.
During the tests, two smaller siphoning systems, including one brought online on Monday, will be turned off. But BP warned the outcome was uncertain since the system has never been tested at such depths.
A massive operation is underway to capture the oil at sea, prevent it from washing onto the coast and to clean up beaches, marshes and bayous already affected.
On the watery bayou near Myrtle Grove, Louisiana, Emile Trudeau (69) gazed at the water outside his camp, where faint traces of oil could be seen in standing water.
“I’m hoping that’s going to fix it,” he said of the new cap. “They don’t realise how much hurt they put on us. Everybody’s got trouble now.” - Reuters