Update: BP Oil Spill

Introduction

A spokeswoman for BP told the BBC that it was “ahead of the original schedule of completion in August.” Asked about comments made by Bob Dudley, the man in charge, that finishing by July 27 was possible, she emphasized the caveats in what he said. Mr. Dudley said completely between July 20 and 27 was possible but only “in a perfect world with no interruptions.” (BBC) In his interview with the Wall Street Journal newspaper earlier this week, Mr. Dudley added that such a “perfect case” was threatened by the hurricane season in the region and was “unlikely”.

New Drilling Ban

The Obama administration said on Thursday it will immediately issue a revised ban on deepwater drilling if an appeals court bars it from reinstating the six-month moratorium it imposed in the wake of the BP oil spill. However, the administration will not impose a new drilling ban if the federal court in New Orleans supports its initial moratorium, an Interior Department official told Reuters. A hearing before a three-judge appeals panel is scheduled for 3 p.m. (4 p.m. EDT) on Thursday on the ban imposed during an investigation of the April 20 rig explosion that killed 11 men and triggered the worst oil spill in U.S. history.

Hurricane Warnings

The US National Hurricane Center issued a warning in the early hours of Wednesday about a tropical depression which has formed in the Gulf of Mexico. Tropical storms could disrupt efforts to contain oil which has been leaking from the site of the Deepwater Horizon rig since April. Although the depression is not predicted to become a major hurricane, tropical storm warnings were issued for the Texas and Mexico coastlines.

Cleanup Costs

BP is facing massive clean-up costs and compensation claims as a result of the Gulf of Mexico oil leak. Spokeswoman Sheila Williams said that as the drilling for the relief well got deeper and closer to the leaking pipe the operation would become “more delicate and technically more difficult.” (BBC) Estimates of the leak’s severity vary widely, to as high as 100,000 barrels per day. BP has committed to a $20 billion fund for clean-up and other costs stemming from the spill. Its costs to date have topped $3 billion.

Relief Drills

Since the oil started leaking BP has tried a number of different ways to plug the well, including a failed “top kill” procedure which tried to staunch the flow by pumping huge quantities of mud into the blowout preventer (BOP) that sits on the seabed. The company began drilling for the first of two relief wells on May 2, and for a second on May 16.

Critical U.S. Government

The U.S. government has been highly critical of BP’s handling of the oil leak. Congressmen have accused Chief Executive Tony Howard of not taking responsibility for the disaster, while questioning him about alleged cost-cutting measures that could have contributed to the explosion and leak. On Wednesday the U.S. government asked BP to tell it of any major asset sales or merger deals in advance, as it continues to keep a close eye on the oil giant. The letter includes a list of questions about BP’s efforts to cap the well and ordered the company to respond within 24 hours. The letter said the containment effort is entering a “critical stage” and demanded a detailed timeline for estimated completion of relief wells and contingency plans. The highly unusual request was made in a letter from the U.S. Department of Justice, dated June 23. BP told the BBC that it had yet to respond to the letter.

The BP oil spill has taken its place firmly at the top of President Barack Obama’s political agenda and complicated U.S. ties with close ally Britain. Obama’s handling of the crisis has been subject to severe criticism despite widespread public anger in the United States at BP.

Shares and New Investor Rumors

BP’s New York share price on Thursday was little changed after rising about 24 percent in the past eight training days on talk that company executives were seeking new investors and optimism the worst might be behind the company. In its most recent update, BP said the oil leak had now cost it $3.12 billion, though the total cost is forecast by analysts to be tens of billions of dollars. As a result, the company has said it will look at selling some assets and attracting new investment.

Mr. Hayward visited Abu Dhabi on Wednesday, with media reports speculating he was in the region to entice wealthy investors. BP said Mr. Hayward’s visit was routine.

Speculation has grown in recent days about potential investors in BP, including the Kuwaiti Investment Authority, China’s PetroChina and the US oil giant Exxon Mobil. These reports, as well as statements from BP saying the company had no plans to issue new shares, have helped the company’s share price to rally this week – including a 5% rise on Wednesday. But despite the bounce, BP’s shares have almost halved in value since the Deepwater Horizon explosion on April 20. The Philadelphia oil services sector index was also about flat and trading volume was low, as traders waited for result of the hearing.

Singapore State investor Temasek Holdings on Thursday dismissed talk it had talked to BP about a strategic stake. “It’s speculation,” Temasek Executive Director Simon Israel told reporters, which followed visits to Azerbaijan and Russia.

Recent News

A federal judge stopped the administration’s drilling ban last month, ruling in favor of companies like Hornbeck Offshore Services Inc. which argued the moratorium was too broad, would cost jobs and unfairly punished their industries. Justice Department lawyers will argue the ban is sufficiently narrow and necessary to avoid another disastrous spill. Whichever side loses on Thursday could appeal to the full appeals court, and the case ultimately could be taken to the U.S. Supreme Court.

Coastal Residents’ Response

Coastal residents – out of work from fishing bans and a slumping tourist industry, and contemplating the ecological damage posed by tar clumps as large as school buses – say what has been done so far is nowhere near enough. “We have been asking for more protection since the oil began spewing into the Gulf and we are so frustrated because it seems that BP wants the oil to come on shore,” said Tommy Longo, mayor of Waveland Mississippi, where high tides were washing sheets of the black crude onto the beaches. (Reuters)

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