Rig sinks in Gulf of Mexico, oil spill risk looms

Fire boat response crews battle the blazing remnants of the off shore oil rig Deepwater Horizon, off Louisiana, in this handout photograph taken on April 21, 2010 and obtained on April 22. Eleven workers were missing and 17 injured in an explosion at the Transocean oil drilling rig, and crews were fighting the fire 16 hours later, the U.S. Coast Guard said on Wednesday. An estimated 126 people were aboard the Deepwater Horizon at the time of the explosionA Coast Guard MH-65C dolphin rescue helicopter and crew document the fire aboard the mobile offshore drilling unit Deepwater Horizon, while searching for survivors April 21, 2010. Multiple Coast Guard helicopters, planes and cutters responded to rescue the Deepwater Horizon's 126 person crew. Picture taken April 21, 2010.

HOUSTON (Reuters) - An oil drilling rig that had burned for 36 hours in the Gulf of Mexico sank on Thursday as hopes dimmed for 11 missing workers and the risk of a major oil spill loomed, officials said.

The fire went out as the Deepwater Horizon, operated by Transocean Ltd, sank below the surface at 10:21 a.m. CDT (1521 GMT), about 42 miles off the Louisiana coast.

The rig was drilling BP Plc's Macondo project with 126 workers on board when it was ripped by an explosion and fire on Tuesday night. Some 115 workers escaped, including 17 helicoptered to New Orleans area hospitals with injuries.

Search and rescue operations turned up two empty lifeboats, and officials cited dim hopes that the 11 workers missing since the blast about 10 p.m. CDT Tuesday night would be rescued.

"We do continue with search and rescue activities," the 8th District Coast Guard Commander Rear Admiral Mary Landry said. "As time passes, however, the probability of success in locating the 11 missing persons decreases."

Transocean, based in Zug, Switzerland and the world's largest offshore drilling contractor, said some of the missing may not have been able to escape the rig.

"Based on reports of crew members, at the time of the incident, they believe they may have been on board and not able to evacuate," said Adrian Rose, a vice president of Transocean.

U.S. lawmakers called for the Coast Guard and Minerals Management Service to investigate the incident.

"It is critical that these agencies examine what went wrong and the environmental impact this incident has created," said Sen. Mary Landrieu, Louisiana Democrat.

The explosion comes almost three weeks after President Barack Obama unveiled plans for a limited expansion of U.S. offshore oil and gas drilling.

It was unclear whether the rig sank to the bottom in about 5,000 feet of water, or how much oil still flowed or had spilled from the well, officials said.

By Thursday afternoon, a five-mile long oil slick extended from the accident site, which has the potential to be a "major" oil spill, the Coast Guard said.

Officials said floating oil spill barriers, skimmers and airplanes to drop dispersant were being prepared to control and clean up the spill.

A remotely operated unmanned submarine, commonly used in the industry, was deployed to determine the exact location and condition of the rig and the situation of the well, which extends 5,000 feet through water and 13,000 feet beneath the seabed.

"We continue to assist Transocean in the effort to halt the flow of oil from the well through the use of a remotely operated vehicle to activate the subsea blowout preventer," said David Rainey, vice president of Gulf of Mexico Exploration for BP, a leading oil and gas operator in the Gulf.

Officials said an investigation was being launched to determine exactly what happened. Sometimes oil and gas well drilling hits pockets of high pressure that were not anticipated and cannot be controlled, experts said.

The well in Tuesday's accident was the first of a series to be drilled and was in the process of being temporarily plugged pending production.

"The well had been cased off. We were actually in process of running the final plug," Rainey said. "At this point, we don't understand what happened."

The rig explosion did not have an effect on crude oil prices because the well was not in production mode.

Shares of Transocean traded on the New York Stock Exchange fell 8 cents to $90.29, while shares of BP traded on the NYSE were off 54 cents at $59.55.

(Editing by Marguerita Choy)