The best hope for capturing oil flowing from a ruptured well 5,000 feet below the surface of the Gulf of Mexico (GOM) until a permanent fix is found was hanging about 200 feet above the sea floor Friday afternoon.
Crews were working to move into place and lower a 100-ton purpose-made, box-shaped “containment dome” over the largest of two remaining leaks resulting from the apparent blowout of the well last month (see NGI, May 3).
“This is a very large device and it needs to be very precisely placed,” BP plc COO Doug Suttles told reporters Friday. The placement of such a device has never been attempted in waters as deep as the spill site location.
BP is the majority owner and operator of the lease on Mississippi Canyon Block 252 where the well was hemorrhaging an estimated 5,000 b/d, or about 210,000 gal/day, of crude.
Responders hoped to have the dome in place by the end of Friday and connected to a drillship at the sea surface over the weekend. Operations to collect the oil and process it aboard the drillship were to begin Monday, it was hoped.
In processing, the resulting gas will be flared, water will be discharged to the sea, and the remaining oil will be stored onboard the ship and lightered as needed. The resulting oil could end up being sold, Suttles said, but he did not have any details Friday.
Meanwhile, drilling continues on a relief well, which responders hope will be a permanent fix to the leaks, which are coming from a crumpled riser on the sea floor. A relief well could take up to 90 days to complete.
Responders have now given up on trying to activate the nonfunctioning blowout preventer using remotely controlled submarines, Suttles said. “We worked on that for essentially two weeks. We have at least two other options…”
One of the options is to inject materials, such as “rubber cuttings” to try to plug up the well. “Some people have referred to it as like plugging up a toilet…We don’t want to do anything that can make the situation worse,” he said.
The second option Suttles spoke of Friday is to put another blowout preventer on top of the nonfunctioning one. “That’s a very complicated task,” he said. “Those options are being studied while we put the containment dome in place and drill the relief well.”
Also on Friday, the National Oceanic and Aeronautics Administration (NOAA) modified and expanded the boundaries of the closed fishing area to better reflect the location of the spill. It also extended the fishing restriction until May 17.
The closed area now represents slightly less than 4.5% of GOM federal waters. The original closure boundaries, which took effect May 2, encompassed less than 3%. The vast majority of Gulf waters has not been affected by the spill and continues to support productive fisheries and tourism activities, NOAA said.
According to NOAA, there are 3.2 million recreational fishermen in the GOM region who took 24 million fishing trips in 2008. Commercial fishermen in the Gulf harvested more than one billion pounds of finfish and shellfish in 2008.
NOAA is working with state governors to evaluate the need to declare a fisheries disaster. The states of Louisiana and Mississippi have requested a federal fisheries disaster be declared.
According to the U.S. Coast Guard and BP, as of Friday, 256 vessels were responding to the spill; 788,085 feet of boom had been deployed with nearly 1.29 million feet still available; about 1.89 million gallons of oil and water (roughly 90% water) had been recovered; more than 267,000 gallons of oil dispersant had been used with more than 317,000 gallons available.
On Thursday Interior Department Secretary Ken Salazar said that because of the rig explosion and spill, beginning April 20 — the date of the incident — no applications for drilling permits will go forward for any new offshore drilling activity until the Department of Interior completes a safety review requested by President Obama.
“To be clear, ongoing oil and gas production in the Gulf of Mexico is continuing, and the Department of Interior is verifying that those operations are in compliance with all laws and regulations,” said Lars Herbst of Interior’s Minerals Management Service.
Herbst said 30 drilling rigs had been inspected and no urgent cause for concern had been found. Inspectors on Friday were examining deepwater production facilities.
House Energy and Commerce Subcommittee Chairman Ed Markey (D-MA) was to lead a bipartisan delegation of committee members to the GOM on Friday. The delegation was expected conduct a flyover of the oil spill with experts from the U.S. Geological Service and the National Atmospheric and Oceanic Administration and be briefed by the USCG, the Department of Interior, and others.
Switzerland-based Transocean Ltd., owner of drilling rig Deepwater Horizon, has received $481 million of an approximately $560 million in insurance proceeds it expects to receive this quarter, the company’s CFO told financial analysts.
“We have incurred costs in the current quarter related to the incident, and we will provide an update on them during our second quarter call, including commentary on provisions for contingent liabilities,” said CFO Ricardo Rosa.
According to CEO Steven Newman, it does not appear that the company will be financially liable for the environmental and other consequences of the oil leak that followed the rig’s sinking.
“The way the contract language typically reads, we are indemnified from any expense or claim related to pollution from the wellbore,” Newman said. “And we believe in this particular instance the contracts are pretty clear about that. Our industry has a long history of contract sanctity and we expect BP to honor that.”
Asked whether he was aware of incidents in the past similar to what occurred with Deepwater Horizon, Newman said he was aware of some over the history of the offshore drilling industry. “I’m sure we would identify well control events where hydrocarbons were allowed to get to the surface…none, obviously, of this magnitude.”
Newman confirmed that the company had received a letter from BP — which the oil major is said to have sent to all drilling contractors — asking it to verify the conditions of blowout preventers on its rigs. “We are currently going through the exercise of responding to the questions that are addressed in that letter,” he said.
BP CEO Tony Hayward said recently on ABC’s “Good Morning America” that the explosion and sinking of Transocean Ltd.’s Deepwater Horizon drilling rig was not his company’s accident but rather Transocean’s. However, he said BP accepted full responsibility for cleaning up the spill. “This wasn’t our accident. This was a drilling rig operated by another company,” Hayward said. “It was their people, their systems, their processes. We are responsible not for the accident, but we are responsible for the oil and for dealing with it and cleaning the situation up.”
In response to another analyst’s question, Newman said he expected the Obama administration to take a thoughtful approach to the regulation of offshore drilling following the accident. “I don’t think that the administration are going to act rashly about this,” he said. “I think they’re going to be as thorough as the industry is in understanding what happened.”
In a research note analysts at Barclays Capital predicted that the industry is in for a good deal of attention from regulators. “Every development plan could come under scrutiny; every failsafe mechanism may need examination to see if it needs to have another backup system and even more built in redundancy,” Barclays analysts said.
Transocean reported first quarter net income of $677 million ($2.09/share) on revenues of $2.602 billion, compared with net income of $942 million ($2.93/share) on revenues of $3.118 billion for the year-ago quarter.
Meanwhile last week Moody’s Investors Service revised to “negative” from “stable” the outlook on the “Aa1” senior unsecured ratings of BP and its guaranteed subsidiaries, and the “Aa2” long-term issuer ratings of BP Corp. North America Inc. and BP Finance plc.
“Moody’s action reflects the considerable uncertainty associated with the financial liabilities and clean-up costs that BP may incur as a result of the oil spill in the Gulf of Mexico caused by the explosion on the Transocean Deepwater Horizon drilling rig,” the ratings agency said. “Moody’s notes the comprehensive response effort put in place by BP with the support of the U.S. authorities and in cooperation with some of its industry peers. However, it remains impossible at this stage to assess the full extent of the costs and business impact of this accident on BP’s results.”
Standard & Poor’s Ratings Services also changed its outlook on BP to “negative” suggesting a ratings downgrade is more likely.
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