Last week's sinking of Transocean Ltd.'s Deepwater Horizon rig following an apparent well blowout went from tragic to worse over the weekend as oil began leaking from the well the rig had been drilling on Mississippi Canyon Block 252 (MC252). Last Friday evening the search for 11 missing crew members was abandoned.

Attempts Sunday to seal the wellhead were unsuccessful. The leak was estimated to be flowing 1,000 b/d into the Gulf of Mexico (GOM) as rough weather kept oil skimmers in port while the oil slick widened to an estimated 600 square miles. However, on Monday the spill was not expected to impact the coastline for at least three days, based on the weather outlook. The site is 130 miles southeast of New Orleans.

BP plc, owner of the lease, said it was preparing to drill relief wells to permanently secure the leaking Macondo exploration well. The drilling rig Development Driller III was expected to arrive on the scene Monday evening to drill a well to intercept the Macondo well and inject a heavy fluid to prevent flow of oil or gas and allow work to permanently seal the well, the company said.

During a press briefing Monday afternoon BP's Doug Suttles, COO of global exploration and production, said efforts are still under way to get the well's blowout preventer to work. The unit is 50 feet tall and 18 feet wide and weighs as much as 12 semi tractor-trailer rigs, he said. While workers can't see inside the blowout preventer, they are using remotely operated vehicles to try to activate it from the outside.

If the blowout preventer can't be activated, a relief well or wells will have to be drilled, he said. In the meantime, crews are working on a "state-of-the-art" oil collection system for the spilled oil.

According to the National Oceanic and Atmospheric Administration (NOAA), the spill is "very thin" and consists of "97% sheen," BP said Monday.

"We are attacking this spill on two fronts -- at the wellhead and on the surface offshore," said BP CEO Tony Hayward, who has traveled to Texas and Louisiana this week to meet with response personnel.

Transocean Vice President Adrian Rose said the company has not yet evaluated the possibility of salvaging the sunken rig, which rests under 5,000 feet of water. "We just don't know until we get an evaluation," he told reporters.

Lars Herbst, MMS regional director for the Gulf of Mexico, said the Ocean Endeavor, a drilling rig owned by Diamond Offshore Drilling Inc. working near the site, had been evacuated as a precaution. He stressed that the rig is engaged in drilling and not production and that its evacuation was due to an "abundance of caution."

Meanwhile, analysts predicted political pain for the industry, which has strived for years to expand drilling access and recently won some ground with the Obama administration (see Daily GPI, April 1).

"...BP continues to be associated with deepwater woes [Thunder Horse (see Daily GPI, Sept. 19, 2006)], and we wonder if this accident impacts BP's ability to attract non-operating partners in future projects," analysts at Tudor, Pickering, Holt & Co. Securities Inc. said in a note Monday. "...Captain Obvious also points out that the timing was impeccably bad with the Obama administration contemplating expanding offshore drilling.

"The longer it takes to control the well (i.e, the more oil spilled) the louder the environmental argument will be for less access. Less obvious: issues like this drive up insurance rates, so all operating in Gulf of Mexico may take an insurance hit. You also have to assume that anyone associated with the well will get sued by families of lost workers, environmental groups, etc."

The field operations response is being coordinated in Houma, LA. Almost 500 personnel on- and offshore have been deployed to coordinate the response. BP's team is working in coordination with several agencies, organizations and companies including the U.S. Coast Guard (USCG), Minerals Management Service (MMS), Louisiana Department of Environmental Quality, National Oceanic and Atmospheric Administration, U.S. Fish & Wildlife Service and Louisiana Wildlife and Fisheries.

BP has also secured the services of Marine Spill Response Corp. (MSRC) to deal with the leak and spill.

"At BP's request we are mounting the single, largest response effort in MSRC's 20-year history," said MSRC CEO Steve Benz. "The many years of working together with BP on drills and exercises has proved invaluable to us as we move forward on this response effort."

An investigation is under way by USCG and MMS to determine the cause of the incident, which occurred last Tuesday night. Last Friday a leak was thought to not be imminent (see Daily GPI, April 26).

As the responsible party, BP is required to fund response and recovery costs. The Oil Spill Liability Trust Fund is also available to fund costs if required.

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