BP cuts ruptured oil pipe

VENICE, Louisiana (Reuters) - BP cleared the way on Thursday for an attempt to cap the runaway oil spill in the Gulf of Mexico and funnel escaping crude to the surface in a high-stakes bid to slow the 45-day-old undersea gusher.

The energy giant’s robot submarines sheared off the pipe rising above the crippled wellhead assembly after more than two days of trying, setting the stage for an attempt to lower a containment apparatus over the oil-spewing pipe.

Despite the initial success in its latest effort to curb the flowing crude, BP’s financial outlook was further clouded as two credit-rating agencies downgraded the company’s debt, reflecting assessments that BP faces lasting damage.

Hours later, the Obama administration said it had sent a preliminary bill for $69 million to BP and “other responsible parties” to cover oil spill costs.

The U.S. disaster response chief, Coast Guard Admiral Thad Allen, said BP would begin trying later on Thursday to position a containment cap over the wellhead assembly to start bringing at least some of the escaping oil and gas to the surface, where it would be collected on ships and safely removed.

BP chief executive Tony Hayward said the next 12 to 24 hours will determine whether the capping operation will succeed.

“It’s an important milestone,” Hayward said in Houston, adding, “This is simply the beginning.”

It was the first glimmer of hope for BP after many futile attempts to contain an oil leak that is belching 19,000 barrels of oil per day into the Gulf of Mexico. Allen called the day’s developments a “significant step forward.”

BP does not expect to be able to fully halt the oil flow until August, when two relief wells are due for completion.

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President Barack Obama, seeking to contain political fallout from the disaster, planned to visit the Louisiana Gulf coast again on Friday to view what has eclipsed the 1989 Exxon Valdez disaster as the worst oil spill in U.S. history.

Obama told CNN’s “Larry King Live” to be broadcast on Thursday night that he is “furious at this entire situation” in the Gulf because “somebody didn’t think through the consequences of their actions.” Obama said he has not seen enough of a rapid response from BP.

The U.S. National Center for Atmospheric Research projected that the oil slick would be driven by wind and currents around the Florida peninsula by early summer and up the East Coast, possibly as far as North Carolina.

The Coast Guard said late on Thursday that oil spill investigators were responding to renewed reports of tar balls and other oily debris near several islands in the Florida Keys, which extend from the southern tip of the Florida peninsula.

But the substances will be tested to see if they originated from the Gulf spill. Tar balls found in the Keys weeks ago were determined to be unrelated to the blowout.

Ratings agencies Moody’s and Fitch Ratings downgraded BP’s credit ratings on Thursday and said they might cut them further on rising concerns over clean-up and legal costs.

Fitch, which in May admitted it had been wrong to assume that the impact of the spill on BP’s finances would be eased by insurance, said clean-up costs could exceed its worst-case scenario of around $5 billion in any one year.

Shares in BP, which are traded in London and New York, had a roller-coaster day but eventually jumped in New York by 4 about percent.

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Elsewhere in the sector, shares of Halliburton Co. were down about 0.4 percent and Cameron International dropped 0.7 percent in late trading.


Two U.S. lawmakers have called on BP to suspend shareholder dividends until the full costs of the oil spill cleanup are calculated.

London-based investment bank Evolution Securities said in a research note: “We believe BP will bow to political pressure in the U.S. and suspend dividend payments for the remainder of 2010.”

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Hayward, seeking to reassure the rattled residents of the Gulf coast, vowed BP would work to sop up the mess and would stay “until every drop of oil has been recovered” and will “meet our obligations to our stakeholders.”

Oil has been gushing nonstop into the Gulf since April 20, when a Transocean Ltd drilling rig licensed to BP exploded, killing 11 workers. The resulting spill has threatened to wreak havoc on the fragile ecology and economies of the Gulf Coast states while confronting the Obama administration with a key test of its ability to handle a complex and evolving crisis.

In another development, the U.S. Minerals Management Service said it would no longer approving drilling permits for shallow waters in the Gulf of Mexico, effectively extending a federal drilling ban the White House had said last week would end soon.

Obama, whose reputation is on the line over the spill, scheduled his third visit to the Gulf on Friday. His spokesman, Robert Gibbs, dismissed suggestions by some pundits that the president should drop his calm demeanor and show more emotion.

“Pounding on a podium is not going to fix a hole in the ocean,” Gibbs said.

Washington Post columnist David Broder wrote on Thursday that Obama “will have to hope he doesn’t end up as Jimmy Carter,” the U.S. president who lost his 1980 reelection bid after failing to secure the release of hostages held in Iran for 444 days.


Government forecasters said part of the far-flung oil sheen had crept to within 6 miles of Florida’s Gulf coast panhandle and was expected to reach the white, sandy shore there in days.

Emergency planners kept a wary eye on two powerful currents in the Gulf, the loop ring that circles the bulk of the spill and the loop current that would carry oil south toward the Florida Keys and then up around the U.S. Eastern seaboard. They were expected to converge in 48 to 72 hours.

“Once those connect, that’s it,” state meteorologist Amy Godsey said.

Louisiana is the state hardest hit so far by oil, though the spill has fouled beaches in Mississippi and Alabama.

Thousands of fishermen, shrimpers and other seafood workers have been idled for weeks by government-imposed fishing restrictions that cover 37 percent of U.S. federal waters in the Gulf.

BP could face billions of dollars in fines and penalties if a Justice Department investigation finds wrongdoing, in addition to billions from the economic liability and damages, according to legal experts.

It may also find it more difficult to meet targets for expanded production in the future, analysts said.

(Additional reporting by Verna Gates on Dauphin Island and Michael Peltier in Tallahassee, Florida, Chris Baltimore and Kristen Hays in Houston and Deborah Zabarenko in Washington)

Writing by Steve Holland; editing by Alan Elsner