BP defends CEO, eyes new option for plugging well

LONDON/HOUSTON Wed Jul 21, 2010 5:23pm EDT

1 of 10. BP CEO Tony Hayward delivers his opening statement about the BP oil spill in the Gulf of Mexico at the House Energy and Commerce Committee on Capitol Hill, June 17, 2010.

Credit: Reuters/Larry Downing

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LONDON/HOUSTON (Reuters) - BP Plc defended its embattled chief executive on Wednesday and denied he would soon leave as the company prepared to launch within days a new approach to ending the worst oil spill in U.S. history.

CEO Tony Hayward, criticized for a series of public relations gaffes and failed efforts to end the disaster, has the full support of the company's board and will remain in his job, a BP spokesman said. The spokesman dismissed a Times of London report that Hayward would step down within 10 weeks.

In response to the spill, big oil companies including ExxonMobil Corp and Royal Dutch Shell said they would spend $1 billion to develop a new spill containment system for the Gulf of Mexico.

The project will be engineered for water depths up to 10,000 feet and have an initial capacity to contain 100,000 barrels (4.2 million gallons/15.9 million liters) of oil per day.

The environmental disaster caused by the April 20 oil rig explosion off the coast of Louisiana has devastated U.S. Gulf Coast tourism and fishing industries, dented President Barack Obama's approval ratings and complicated the traditionally close U.S. relationship with Britain.

BP capped the blown-out well last week, choking off the flow of oil for the first time since the explosion. U.S. officials have given BP permission for more pressure tests on the capped well a mile below the ocean surface.

BP scientists are also preparing another option -- a "static kill" to help smother and plug the leak. That approach would involve pumping heavy drilling mud and possibly cement into the well, much like BP's failed "top kill" effort in May.

The top U.S. spill official, retired Coast Guard Admiral Thad Allen, said that if he approves the plan, BP could begin that "static kill" operation by this weekend -- if bad weather does not force a delay.

Officials are watching a northern Caribbean weather system that could move into the Gulf and force BP to delay its work by up to 10 to 14 days if all vessels must evacuate.

"Any operations out there would have to be suspended whether it's containment or the relief well," Allen said of the potential storm. BP is drilling a relief well intended to intersect and plug the ruptured well next month.

The relief well needs one last set of piping, or casing, cemented in place to hold it open before a drill bit can bore into the Macondo well near its bottom, 13,000 feet (2.4 miles) beneath the seabed, Allen said.

"Once the casing is in place, the static kill can proceed by this weekend," Allen said.

BP's market value has fallen around 39 percent since the oil began spewing into the Gulf, and the company worked on Tuesday to line up $7 billion in asset sales to help pay for the spill.

BP STOCK RISES

BP shares rose on Wednesday, buoyed by its sale of oil and gas properties in the United States, Canada and Egypt to U.S. company Apache Corp as part of a $10 billion asset disposal plan.

BP shares closed up 2.6 percent in New York and 3.2 percent in London.

Bank of America Merrill Lynch, Citigroup, Goldman Sachs and JP Morgan are leading a $5 billion bridge loan backing Apache Corp's purchases in Texas, New Mexico and Egypt, three banking sources familiar with the deal said.

"Such a material sale, achieved so quickly, should ease if not banish any lingering concerns about BP's liquidity position," JP Morgan said in a note, adding the terms of the deal looked robust and underlined the mismatch between what BP could get for its assets and its battered stock price.

Dutch bank ING said that BP could afford to go beyond its $10 billion asset-sales target, potentially making more than $45 billion from divestments without denting its core activities.

The spill sparked a wave of anger at BP among the American public and U.S. lawmakers, and Hayward's ouster has been the subject of speculation after a failure to quickly stem the flow of oil into the Gulf and a series of public relations gaffes that stoked public anger at BP.

Hayward complained, for example, that he wanted his life back as the disaster unfolded, and attended a festive yacht race off the English coast while oil from the spill continued to pollute the U.S. coastline.

HAYWARD SPECULATION

There was a growing expectation that Hayward would announce his departure in late August or September, with Robert Dudley, chief of BP's Gulf Coast restoration efforts, seen as the front-runner to replace him, the Times said.

But the BP spokesman said of Hayward: "He has full support from the board and will remain in place."

The Times, citing a person close to the matter, said Hayward would have to leave so the British energy giant could protect itself against a potential buyout threat by ExxonMobil or Royal Dutch Shell.

Analysts have said a takeover by Exxon or any other oil company is unlikely because U.S. regulatory hurdles would be high.

The company created a $20 billion fund to compensate victims of the disaster. Kenneth Feinberg, appointed by Obama to oversee the fund, told the House of Representatives Judiciary Committee he might be more generous with claims than a court would be.

The states of New York and Ohio asked a federal judge to appoint them lead plaintiffs in spill-related class-action lawsuits against BP. In a court filing, the states said their BP investments had lost $181 million because of the company's alleged misleading of investors over the spill.

(Additional reporting by Karolina Tagaris in London, Matt Spetalnick and Emma Ashburn in Washington, Michelle Sierra in New York, Anna Driver in Houston; Writing by John Whitesides; Editing by Philip Barbara)

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Comments (8)
Handel wrote:
I wished Obama would quit soon. With all the havoc ,that he has caused to the American economy; he should resign. Dutch Shell or Exxon better watch out, because they are dealing with people, who are only interested in shaking down corporations.

Jul 20, 2010 12:11am EDT  --  Report as abuse
@ Handel, I largely agree with you but deviate on the Exxon note. Exxon are safe as houses, they are an American company. Foreign company’s operating in the US are not safe…..no more safe than foreign company’s operating in China.
Dont let the US mislead you, they are just as corrupt and self centered as the Chinese.

Jul 21, 2010 7:04am EDT  --  Report as abuse
Joe200011 wrote:
Handel,
You seem to overlook something: FACTS

Bush & Cheney increased the national debt by $6 trillion. Bush prevailed upon congress to increase the national debt cap to the present $13 trillion and then left office.

The previous administration denied that there was a recession.

The previous administration enacted TARP.

Obama INHERITED this economy and, every step of the way, the republikans have been stonewalling or filibustering his efforts to turn things around.

The republkans have spurned every effort he’s made to achieve detente with them but, they are still so incensed that he won in a landslide that they are just unable to assume their proper role.

The previous administration, as well as Reagan/Bush, were responsible for the massive deregulation of Wall Street, the insurance industry and banking industries and hand-fed the military industrial complex trillions.

Bush/Cheney were almost indicted for getting us into Iraq again under false pretenses.

The policies of Bush/Cheney were rejected overwhelmingly by the American people and that is why Obama is YOUR president now.

The republikans, through lying, deceit, obfuscation, embellishments and pretending to WANT to be constructive, have substantially slowed the process of recovery and hurt our country.

We can’t survive another republikan term like the last one.

Obama said that it would take a while to turn things around and if he has to create a little havoc to accomplish it, so be it.

There are two economies in this countries. The economy of the rich and the economy of the people. The economy that he needs to create havoc in is the economy of the rich. The more it hurts, the better off the people will be.

Jul 21, 2010 8:19am EDT  --  Report as abuse
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