June 11, 2010 / 12:59 AM / 7 years ago

Britain sticks up for BP amid spill

<p>A contract worker throws a bag of absorbent material on a beach impacted by oil from the Deepwater Horizon oil spill at Elmer's Island, Louisiana June 11, 2010. REUTERS/Lee Celano</p>

LONDON/VENICE, Louisiana (Reuters) - Britain stuck up for beleaguered BP Plc on Friday against American criticism over the Gulf of Mexico oil spill, while the company ramped up efforts to siphon more crude from its gushing well.

British Prime Minister David Cameron and his finance minister George Osborne stressed the London-based company was economically important to both Britain and the United States.

The British government’s backing helped boost BP shares, which have been battered this week as the Obama administration ratcheted up criticism of the company over the 53-day-old spill, the worst environmental disaster in U.S. history.

Millions of gallons of oil have poured into the Gulf since an April 20 explosion on an offshore rig killed 11 workers and ruptured BP’s deep-sea well. U.S. scientists on Thursday doubled their estimate of the amount of oil flowing from the well.

BP has been capturing oil from the leaking well since installing a containment system, or cap, last week.

It is moving a second ship to the spill site to enable it to increase the amount of oil it is siphoning from the well “toward the end of June,” the Obama administration’s point man for the disaster, Admiral Thad Allen, said.

Under U.S. government direction, BP also plans to nearly double its oil-collecting capacity by mid-July. The upgraded oil collection system could potentially siphon up to 50,000 barrels a day, Allen said.

The well will not be sealed until August, when two relief wells now being drilled are due to be completed. In the meantime, an unknown amount of oil still gushes forth.

Energy Secretary Steven Chu told Reuters that BP’s latest effort to capture the leaking oil had not made the spill dramatically worse, dispelling fears of government scientists that it could increase the flow of crude by up to 20 percent.

“The estimates of 20 percent or more are incorrect,” Chu said.

Obama administration officials have threatened to increase BP’s liabilities for the spill, which is causing an ecological and economic disaster along the U.S. Gulf Coast. U.S. lawmakers are also pressuring the company to suspend its dividend to ensure it has enough cash to pay for cleaning up the mess.

House of Representatives Speaker Nancy Pelosi said on Friday BP should be subjected to unlimited liability costs and should pay all damage claims before issuing the dividend.

BP is considering putting money for the dividend in an escrow account until the full scale of the company’s liabilities can be determined, the Times of London reported, quoting people familiar with the situation.

It said BP board members were discussing a plan to defer the second quarter dividend, due to be announced on July 27. A BP spokesman told Reuters the company was considering all options but no decision had been made.

Meanwhile, oil drilling firm Transocean Ltd. resolved its spat with the Obama administration over its bid to limit its liability in the sinking of its rig, which triggered the spill, according to court papers filed on Friday.

HIGH-LEVEL DIPLOMACY

British Prime Minister Cameron spoke to BP Chairman Carl-Henric Svanberg and expressed frustration about the damage caused by the spill, a spokesman for Cameron said.

“He (the prime minister) said that it is in everyone’s interests that BP continues to be a financially strong and stable company,” the spokesman said.

<p>Smoke billows from a controlled burn of spilled oil off the Louisiana coast in the Gulf of Mexico, in this handout photograph taken June 9, 2010 and released on June 11. REUTERS/Petty Officer First Class John Masson/U.S. Coast Guard/Handout</p>

Osborne, Britain’s chancellor of the exchequer, said after speaking to BP CEO Tony Hayward, “The prime minister is also clear that we need constructive solutions and that we remember the economic value BP brings to people in Britain and America.”

Forty percent of BP’s shareholders are in the United States, with the same percentage based in Britain.

Business leaders, politicians and newspapers have pressed Cameron to defend BP against the Obama administration, whose criticism of the British company has been portrayed in British media as Britain-bashing.

Cameron, who took office in May, is due to discuss the Gulf of Mexico crisis with Obama in a telephone call at 11 a.m. EDT on Saturday.

The call will be a tricky test for the two leaders. Both are under pressure to appear tough to voters at home.

Obama, criticized by some in the United States over his handling of the crisis, has been seeking to direct public anger and frustration over the spill toward BP.

Slideshow (34 Images)

For his part, Cameron must show Britons that he is not caving in to pressure from his country’s most powerful ally.

A spokeswoman for Cameron said the prime minister’s telephone call with Obama would be “statesmanlike and workmanlike.” A White House official played down the BP focus, saying it would be just one of a number of issues raised.

BP STOCK

Shares in BP, which have lost tens of billions of dollars in value since the crisis began on April 20, closed up 7.2 percent in London trading, rebounding from Thursday’s 13-year low and extending a rally that began in New York on Thursday.

BP’s American depositary shares finished up 3.63 percent in New York on Friday.

“Possibly people have taken heart from the fact that the political rhetoric is not just one side of the Atlantic,” said Barclays Capital analyst Lucy Haskins.

Investors appeared unfazed by the news from U.S. scientists that the well’s flow rate may be as high 40,000 barrels (1.68 million gallons/6.36 million liters) per day.

The new estimates could have huge financial implications because under the U.S. Clean Water Act, BP and others could face fines up to $4,300 for every barrel leaked.

With more than 2 million barrels of oil already in the ocean, that could mean fines of $8.6 billion at least.

BP expects the total bill for the clean-up of the spill, which has affected 120 miles of U.S. coastline and closed down rich fishing grounds, will be $3-$6 billion, an analyst briefed by BP said in a research note on Friday.

The slick has already fouled wildlife refuges in Louisiana and barrier islands in Mississippi and Alabama. Tar balls have also washed up on Florida’s famous white beaches. One third of the Gulf’s federal waters remain closed for fishing.

“BP and all involved have downplayed this from day one. Everyone knew it was more than they reported and now basically it’s been proven,” said Kindra Arnesen, a restaurant owner in Venice, Louisiana, whose husband makes his living fishing.

Additional reporting by Steve Holland, Tom Doggett, Jeff Mason, Ayesha Rascoe and Jeremy Pelofsky in Washington, Tom Bergin, Sarah Young, Estelle Shirbon and Andrew Callus in London, and Chris Baltimore and Kristen Hays in Houston; Writing by Ross Colvin; Editing by Ed Stoddard and Paul Simao

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