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BP Set to Test New Cap on Well; US-Traded Shares Rise

Reuters with AP
Tuesday, 13 Jul 2010 | 4:49 PM ET

BP said it will begin pressure tests at its undersea oil leak in the Gulf of Mexico Tuesday afternoon after it placed a new containment cap and seal on the wellhead late Monday, the top official overseeing the spill said.

View from BP's Skandi ROV 2 on July 13.
Source: BP
View from BP's Skandi ROV 2 on July 13.

If the test goes as intended, it would mark the first time that the flow of oil from the crippled well has been halted, at least temporarily, since the April 20 explosionand blowout of the Deepwater Horizon drilling rig that killed 11 crewmen.

Retired U.S. Coast Guard Admiral Thad Allen said BP will first shut down two oil-capture vessels and shut three escape routes for crude on the new stack as well as a hydraulic valve inside of it so the test can start.

If the well can sustain up to 9,000 pounds per square inch of pressure for the first six hours of the 48-hour test, the cap could shut off all flow until a relief well kills the leak by mid-August, Allen said.

But if pressures linger for the first six hours at 6,000 psi or less, "we'll know we can't sustain that in the long run," he said.

Either way, BP will have a four-vessel oil-capture system in place by mid-July that can handle up to 80,000 barrels a day, he said. If the cap can shut off all flow, the vessels will be in place as a backup, Allen said.

Kent Wells, senior vice president of exploration and production, told reporters earlier that BP and government scientists would monitor well integrity test at "very minute intervals."

High pressures would indicate the wellbore is intact after the April 20 blowout, but low pressures would be a sign oil and gas are leaking out the sides, Wells said.

"Everybody hope and pray we see high pressures here," Wells said.

He said relief wells remain the sole means to permanently kill the leak. The first of those wells has another 30 feet to drill before inserting pipe and preparing to intercept the blown-out well by the end of July, Wells said.

Obama to Send BP $99.7 Million Bill

Separately, the Obama administration said it has sent a fourth bill to BP and other parties seeking $99.7 million for costs related to the response and cleanup of the Gulf oil spill.

The administration says three earlier bills, totaling $122.2 million, have been paid in full.

The White House has said all along that BP is responsible for the disaster and must pay all costs associated with the response to the spill, including efforts to stop the leak, reduce the oil's spread and the long-term recovery of the Gulf Coast region.

As the oil giant prepared for a potential turning point in the worst offshore oil spill in U.S. history, it also said its plans to sell non-core assets, which will help pay for a $20 billion clean-up fund, were moving forward.

"We are in discussions with a number of companies about a number of assets. Talks are going well," spokeswoman Sheila Williams said in London, declining to give details.

Investors snapped up BP shares in London on optimism that the new technology would cap the 85-day-old gusher that has caused the disaster and hit the U.S. Gulf economy. In New York, BP closed slightly higher after closing sharply higher in New York tradingMonday.

A fresh focus on divestments highlighted just how much a pounding BP shares have taken, since the company's net asset value is around $80 billion more than its market value, analyst Jason Kenney at ING in Edinburgh said, who is bullish on the shares.

About seven non-core assets — including ones in Alaska, Colombia, Venezuela and Vietnam — could be worth $45-50 billion, he added.

"It just makes absolute nonsense of what the share price has been doing over the past few months," said Kenney, who has a "buy" rating on the stock and a price target 712 pence, one of the highest among analysts.

The shares climbed as much as 5.5 percent to 420 pence, the highest in five weeks, bringing their gains to 41 percent since touched a low at the end of June.

The potential breakthrough in efforts to fully contain BP's ruptured wellhead also came as the Obama administration issued a revised moratorium on deep-water oil drilling that critics called a mere repackaging of an earlier ban struck down by the courts.

The prospect of legal battles over the administration's bid to suspend deep-sea energy exploration in the Gulf already has had a chilling effect on drilling, putting tens of thousands of jobs at risk, industry officials and analysts said.

The drilling moratorium and its toll on the oil and gas industry were expected to highlight the agenda on Tuesday for a second day of hearings by President Barack Obama's independent oil spill commission, meeting in New Orleans.

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