BP Plc said it controlled the pressure in the damaged Gulf of Mexico oil well with drilling mud, moving a step closer to permanently sealing the source of the world’s worst accidental oil spill.
The well “appears to have reached a static condition -- a significant milestone,” BP said in a statement in London today. The company pumped mud into the top of the well in a “static kill” operation that lasted about 8 hours yesterday.
BP will be able to plug the well from the top if the operation is successful. For a permanent seal, the company still needs to complete a relief well, National Incident Commander Thad Allen said yesterday at a Houston press conference.
Government scientists issued revised estimates on Aug. 2 that the well spewed 4.9 million barrels, making it the largest accidental maritime oil spill. About 800,000 barrels was captured by BP, and some was skimmed or burned. Scientists expect to quantify within days how much oil remains in the Gulf, potentially in underwater plumes, Allen said.
The New York Times reported today that three-quarters of the oil leaked from the well has evaporated, dispersed, or been recovered. The remaining oil is so diluted that it doesn’t represent much of a risk for the Gulf, the paper said, citing a government report due to be released today.
CDS Fall
BP credit default swaps insuring the company’s debt fell to the lowest since June 8. Five-year contracts dropped 36 basis points to 270, and swaps for one-year debt tumbled 80 basis points to 254, according to data provider CMA. That’s first time in two months that shorter-dated contracts cost less than longer-term protection.
BP shares fell 1.4 percent to 419.9 pence as of 10:44 a.m. in London. It has fallen 37 percent since the Deepwater Horizon drilling rig exploded on April 20, killing 11 workers and triggering the spill.
Under the Clean Water Act, BP may be obliged to pay a fine of $1,100 per barrel of oil spilled. If the company is found negligent, the penalty may rise to $4,300 a barrel, implying costs of $5.4 billion to $21 billion using the government’s spill estimate.
London-based BP reported a record quarterly loss of $17.2 billion when it reporting earnings on July 27 after booking a $32.2 billion pretax charge related to the Gulf of Mexico oil spill. The company said it would expand asset sales to raise as much as $30 billion over 18 months to help pay for cleanup costs and liabilities from the environmental disaster, which also cost Chief Executive Officer Tony Hayward his job.
Moscow Visit
Ecopetrol SA and Talisman Energy Inc. agreed to buy BP’s fields in Colombia for $1.9 billion in cash, the company said in a statement yesterday.
Hayward and incoming CEO Robert Dudley will meet with Russian Deputy Prime Minister Igor Sechin in Moscow today to discuss the company’s interests in the country.
BP said its relief well, which would inject mud and cement into Macondo from the bottom, will “most likely” intercept the damaged bore by mid-August. The company has said the relief well may complete the permanent kill by the end of the month.
Oil continues to wash ashore 20 days after BP stopped the flow by installing a new cap on the well. About 644 miles (1,036 kilometers) of the region’s coastline is oiled, according to a government operational report late yesterday. About a quarter of the Gulf remains closed to fishing, the National Oceanic and Atmospheric Administration said on its website.
Storms may drive oil onto shore through hurricane season, which ends Nov. 30, Allen said.
Damage Payments
The Macondo spill exceeds the 3.3 million barrels that the Royal Swedish Academy of Sciences estimated leaked from Mexico’s Ixtoc-1 well in the Bay of Campeche in 1979. The worst spill was in the 1991 Persian Gulf War when retreating Iraqi forces opened valves, releasing 6 million barrels into the sea, according to the U.S. Environmental Protection Agency.
BP is accelerating damage payments, saying yesterday it recognizes “frustration” from small-business owners as it transfers authority over claims to an independently administered fund. The company said it processed 2,600 claims during the past three days under an expedited system that eased documentation requirements.
The company has issued a total of 93,000 checks for $277 million in damage claims. Some claims will be deferred until later this month, when the $20 billion Gulf Coast Claims Facility run by Kenneth Feinberg will begin operating, BP said. Feinberg was President Barack Obama’s special master on executive compensation, and he also handled claims for victims of the Sept. 11 terrorist attacks.