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Oil Spill Clean-Up at Key Stage as BP Shares Slide

Reuters
Friday, 25 Jun 2010 | 5:28 PM ET

BP's struggle to contain the Gulf of Mexico oil spill was nearing a potentially important stage Friday even as worries about the soaring costs of the clean-up sent its shares nosediving to a 14-year low in London trade.

The Discoverer Enterprise burns off gas as it collects oil at the site of the Deepwater Horizon oil spill on June 19, 2010 in the Gulf of Mexico off the coast of Louisiana.
Getty Images
The Discoverer Enterprise burns off gas as it collects oil at the site of the Deepwater Horizon oil spill on June 19, 2010 in the Gulf of Mexico off the coast of Louisiana.

The U.S. Coast Guard said the British energy giant plans next week to nearly double its capacity for siphoning oil gushing from its ruptured deep-sea well, but a looming storm raised fears that the effort could be disrupted for days or weeks.

BP and the U.S. government were keeping a careful eye on the weather as an approaching low-pressure system over the western Caribbean Sea gathered strength.

BP said it has paid out $2.35 billion so far in clean-up and compensation costs for the ecological disaster caused by the worst oil spill in U.S. history.

That does not include the $20 billion oil spill fund it has agreed to set up, nor the billions of dollars it will have to pay in fines. Under the Clean Water Act, BP could potentially face penalties of at least $15 billion.

As the spill entered its 67th day, BP said two relief wells that offer the best hope of plugging its well were on track to intercept their target at a depth of 18,000 feet (3.4 miles). The wells are due to be completed in August.

The well ruptured on April 20 when an explosion blew up an offshore rig above it, killing 11 workers. It has spewed millions of gallons of oil into the ocean, soiling large stretches of the U.S. Gulf coastline and threatening multibillion dollar tourism and fishing industries.

BP Stock

Any slowdown in clean-up efforts could place more pressure on President Barack Obama, who has faced criticism over his handling of the crisis, and BP, which has seen $100 billion wiped off its market value since the start of the disaster.

In London, its stock plunged more than 6 percent Friday, trading at its lowest levels since 1996, on talk it needs extra cash to fund the clean-up and worries about the bad weather.

Its U.S.-listed shares touched a new low for the second day in a row, finally closing nearly 6 percent lower at $27.02 a share.

A spokesman for BP said it had "considerable firepower" to meet the costs of the spill and denied market talk that the company was seeking bankruptcy protection.

In the Gulf, BP has been gradually increasing the amount of oil it is siphoning off from the well. It said its oil-capture systems collected or burned off 23,725 barrels of oil Thursday.

U.S. Coast Guard Admiral Thad Allen, who oversees the federal relief effort, said BP was on track to nearly double its oil collection capacity next week.

"We will have three vessels and 53,000 barrels a day of capacity by the end of June," he said.

A third oil-collecting vessel will add 25,000 barrels a day of capacity to the current 28,000 barrels a day, he said.

U.S. government scientists estimate that between 35,000 (1.47 million gallons) and 60,000 barrels (2.5 million gallons) a day are leaking from the well, far above BP's original estimate of 5,000 barrels (210,000 gallons) a day.

Weather Worries

BP's oil collection effort, which has been dogged by a series of mishaps including an underwater accident this week, faces a new threat — stormy weather.

BP Spill Storm Threat
CNBC's Bertha Coombs has an update on how a storm will affect the cleanup operations in the Gulf, with CNBC's Bertha Coombs and a check on oil, with CNBC's Sharon Epperson.

Some computer models show the storm system in the western Caribbean Sea moving over the Yucatan Peninsula and then veering north into the Gulf of Mexico. Others, however, showed the system heading westward toward Mexico.

The system has a 70 percent chance of developing into a stronger storm over the next 48 hours, the U.S. National Hurricane Center said Friday.

U.S. oil crude and gas futures surged higher on worries that the bad weather potentially could threaten oil production in the Gulf of Mexico.

Allen said it would be necessary five days ahead of the arrival of any gale force winds to start to take down the current operations involving ships and other equipment collecting some of the oil spewing from the ruptured well.

Because of this, oil could flow unchecked from the ruptured well into the sea for up to 14 days, Allen said.

Two oil-capture systems siphon oil from the leak to a drillship and a service rig a mile above the well at the water's surface. Both use fixed pipes that require days to disconnect and allow the vessels to move out of the path of a storm, officials said.

BP also would have to suspend any relief well drilling efforts about four days and eight hours before the expected onset of gale-force winds, Allen said.

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