New Leak Causes More Problems for BP Oil Spill

A highly anticipated test designed to measure pressure within BP’s ruptured Gulf of Mexico oil well began Thursday after a delay caused by leaking equipment. The “well integrity test” will last at least six hours and could take up to 48 hours, the company said. BP suspended oil recovery operations during the testing process. “We have the ability to evaluate every six hours, and if we have reason to believe we should terminate the test, we can do that.” (CBC)

“Although it cannot be assured, it is expected that no oil will be released to the ocean during the test,” BP said in a news release. “Even if no oil is released during the test, this will not be an indication that oil and gas flow from the wellbore has been permanently stopped.” (CNN) The custom-made sealing cap, lowered in place earlier this week, has never been deployed at such depths or under such conditions and therefore, there were no guarantees on how well it would contain the oil, BP said.

Earlier Thursday, BP replaced what is known as a choke line after a leak was discovered the day before when the company first attempted the crucial pressure test, said Senior Vice President Kent Wells. BP plans to close off – one by one – the valves on the cap system through which oil can escape, said retired Adm. Thad Allen, the federal government’s disaster response manager. Scientists and engineers will monitor the pressure every six hours and evaluate the situation, Allen said. If at any time, the pressure is deemed too low – meaning that oil is escaping through another source in the breached well – the testing will stop, Allen said.

Allen compared low pressure in the well to a leaky garden hose that dribbles out water with your thumb pressed hard on the nozzle. If the pressure readings are sufficiently high, the valves on the stacking containment cap could remain closed and signal a beginning of the end to the catastrophe that began when the Deepwater Horizon drilling rig exploded April 20, killing 11 workers and triggering the relentless spill. Allen said the cap was not designed to permanently shut in the well – it was meant to move to a four-vessel containment system and assure redundancy in the event of a hurricane. “The intention of the capping stack was never to close the well per se,” Allen told reporters in New Orleans. “The best reason to be able to shut in the well right now… is it allows us to abandon the site if there is a hurricane.” (Reuters) But he said there could be a huge side benefit if the oil can be contained – a “twofer,” as he called it. Allen said the more permanent solution to the spewing oil remains the two relief wells BP is drilling and expects to have them finished in August.

BP pumped drilling mud into those relief wells to migrate risks during the pressure testing. The two wells intersect with the Macondo.

Oil recovery was stopped Wednesday ahead of the integrity test but resumed while BP was fixing the problem with the leaking choke line. It was stopped again with the testing under way. Wells said BP collected 537,600 gallons of oil Wednesday. Government scientists estimate between 1.5 million to 2.5 million gallons are flowing into the Gulf every day.

A key question over the pressure tests was whether shutting the well was worth the risk, or whether they might cause fresh damage to the blowout preventer.

Meanwhile, Allen said the prevailing winds are slowing the drift of oil to shore. “We’re getting a little break in the action as far as the oil closing [on] shore,” he said. “It’s given us a chance to kind of consolidate our forces and make sure we can redouble our efforts on onshore cleanup.” (CBC) Since the explosion on April 20, an estimated 689 million litres of oil has flowed into the Gulf.

U.S. lawmakers, under pressure from citizens angry at the impact the spill is having on their livelihood, are considering a range of new laws that could require tougher safety regulations in offshore drilling or even bar companies like BP from getting new offshore exploration leases. The U.S. government, which has vowed to make BP pay for the fixing of the ruptured well and all cleanup efforts, told the oil giant that it was responsible for paying all royalties on the oil it is collecting from the ruptured well.

In an issue unrelated to the spill, but illustrating the pressure BP faces in the United States, the company confirmed on Thursday that it had lobbed the UK government over a prisoner transfer agreement with Libya in late 2007. In August 2009, Britain released a Libyan convicted of blowing up a U.S. plane, angering the United States. Many of the 270 dead in the 1988 Lockerbie bombing were American.

The Gulf spill has soiled hundreds of kilometres of shoreline, shut down about a third of Gulf fisheries and hurt tourism and fishing in all five Gulf states. It has also created problems for President Barack Obama as the government worked to respond to the crisis while area residents struggled financially.

U.S. shares were up slightly after BP announced it had repaired the leak and would go ahead with the test. They gained more ground on reports of the possible asset deal with Apache. “There’s still hope that this system they’re putting in place will actually work, there’s hope and there’s hype and there’s a high probability that it will work,” said Ted Parrish of Henssler Equity Fund in Kennesaw, Georgia.

“A buyer of assets today in BP’s situation is likely to get a very favorable deal, so Apache is probably working from strength, not weakness,” said Robert Lutts, chief investment officer at Cabot Money Management. “This may be a very good acquisition for them.” (Reuters)

BP shares have been ravaged since the well rupture, with $100 billion in market value being knocked off at one stage, before a three-week rally sparked by takeover talk, speculation about investment by a sovereign wealth fund and hopes that the well would be capped. Arbuthnot analyst Doug Youngson said: “There is quite a lot of nervousness about how effective this cap is going to be and whether it might, in fact, make matters worse. There is a very high degree of uncertainty over which way this is going to go. The language was very bullish at the start of the week but it’s quite quickly turned around.” (Toronto Star)

In Buras, Louisiana, crabber Larry Tew said he was hopeful about the cap tests. “I think it’s going to work… I mean, they don’t have any other choice,” he said. (Toronto Star)

Questions over BP’s role in lobbying the British government over the release of the Libyan Abdel Basset al-Megrahi, convicted in the Lockerbie bombing, also dogged the company. Some U.S. lawmakers called for an investigation. Asked if British Prime Minister David Cameron would speak to Obama about it, Cameron’s spokesman said, “There’s already been contact on the issue of BP and the prime minister and the president agreed that it wouldn’t be in anyone’s interest to see anything that would undermine the value of BP.” (Reuters)

U.S. State Department spokesman P.J. Crowley said no decision had been made about the request for an investigation into whether BP had a role in Megrahi’s release. “It’s not for BP to comment on the decision of the Scottish government,” the BP said in a statement. “BP was not involved in any decision with the U.K. government or the Scottish government about the release of Mr. al-Megrahi.” (New York Times) But the company’s critics have said that such a distinction was largely illusory, since Libya’s pressure for the prisoner transfer pact was primarily motivated, as Libyan officials said at the time, by their desire to bring Mr. Megrahi home.

Long before the Gulf of Mexico disaster, the British government’s role in the Megrahi release – and the involvement of British companies with interests in Libya, including BP – had caused deep strains between the Obama administration and the former Labour Party government in London, which was ousted in a general election in May and replaced by a coalition of Conservatives and Liberal Democrats. Although senior figures in the Labour government insisted that the Megrahi decision was taken independently by the Scottish government, which has wide-ranging legal powers of its own, an official paper trail showed that officials in London had told Scottish officials, in the context of the prisoner transfer agreement, that letting Mr. Megrahi go would benefit British commercial interests. That led to widespread suspicions that the Labour government, eager to promote British commercial interests in Libya but reluctant to be seen taking a step – the release of Mr. Megrahi – that would anger Washington, chose to encourage instead an end-around solution that had the Scottish government making the decision.

British officials have noted privately that the last three American administrations have been keen for American oil companies to strike deals with Libya, and that BP has been joined in the contest for potentially lucrative deals by several American oil giants, including Exxon Mobil and Chevron. Still, the chain of events surrounding Mr. Megrahi fostered deep disillusionment in Washington, where politicians and senior officials criticized what they regarded as Britain’s duplicity in the affair. Their anger was based, in part, on assurances the United States said it had been given at the time of the Lockerbie trial, held before a special Scottish court sitting in the Hague, that anybody convicted in the case would serve the full term handed down by the court. Mr. Megrahi’s conviction was the only one achieved in the case, after a Libyan accused of being an accomplice, like Mr. Megrahi an agent of LIbya’s secret intelligence service, was found not guilty and freed.

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