July 16, 2010 / 12:09 AM / 7 years ago

BP Gulf well cap works so far

HOUSTON/WASHINGTON (Reuters) - BP Plc’s stricken Gulf of Mexico oil well showed no signs of leaking on Friday after a new cap stopped the flowing crude, but President Barack Obama warned that more needed to be done before it was fixed.

BP began pressure tests on the well after choking it off on Thursday for the first time since the April 20 rig explosion that triggered the leak. Underwater robots scanned the sea floor for signs the undersea well was damaged.

“We’ve seen no negative evidence of any breaching there,” said Kent Wells, BP’s senior vice president of exploration and production.

The tests showed the cap was building pressure in the well, meaning it was strong enough to contain the oil without leaking. The Coast Guard confirmed pressure was high enough to allow BP to test through Friday evening.

Obama, speaking at the White House, cautiously welcomed the news. “We won’t be done until we actually know that we’ve killed the well and that we have a permanent solution in place. We’re moving in that direction, but I don’t want us to get too far ahead of ourselves.”

The U.S. leader is under fire to push BP to permanently plug the leak and clean up an environmental and economic mess across five U.S. Gulf states. The spill has cut into multi-billion dollar fishing, tourism and drilling industries.

The offshore spill, the worst in U.S. history, has spewed millions of gallons of oil into the Gulf.

Several previous attempts to plug the leak did not work, and investors remained cautious on BP’s latest effort.

The British energy giant’s shares, which fell about 50 percent in the first two months of the crisis but have gained 40 percent since late June, fell nearly 5 percent as part of a broader sell-off on the New York Stock Exchange.

They inched higher in London.

BP began pressure tests on the well Thursday afternoon and expected them to last up to 48 hours. It then aims to siphon up to 80,000 barrels of oil a day using a seal installed earlier this week and send it a mile up to waiting ships.

Estimates had put the spill rate at between 35,000 barrels (1.47 million gallons/5.56 million liters) and 60,000 barrels (2.5 million gallons/9.5 million liters) a day.

The tests will show whether the cap is strong enough to contain the oil if the ships must disconnect from the well during a hurricane or other emergency.

BP still expects to complete drilling a new well by early August to intersect the ruptured well and seal it with mud and cement.

A robotic arm (L) is visible at work next to BP's new cap on the blown-out well in this image captured from a BP live video feed as BP launches a critical pressure test on its ruptured Gulf of Mexico oil well on July 15, 2010. REUTERS/BP/Handout

TOTAL COSTS

The capping of the well came nearly three months after an oil rig explosion ruptured the well and killed 11 men.

But some residents in battered coastal communities remained skeptical. “This is only the second day. I am not celebrating anything yet,” Cindy Nelson of Biloxi said.

Under pressure from Obama, BP has established a $20-billion fund to cover the costs of the spill.

Three analysts surveyed by Reuters Insider television forecast the company will pay between $63 billion to $100 billion over the next 15 years in fines and cleanup and legal costs. Peter Hutton, an analyst at NCB Securities in London, pegged the total cost at $40 billion.

Slideshow (17 Images)

“It’s relief all around to see that (undersea) camera with no oil coming out,” said Hutton. “But people recognize that they’re not completely out of the woods.”

Investors welcomed reports that BP was moving closer to sealing the first deal in its planned $10 billion of non-core divestments to help pay cleanup costs.

The company and bankers were finalizing details of the asset sales, including some U.S. interests to Apache Corp, said CNBC and the Financial Times.

POLITICAL ENVIRONMENT

The crisis has complicated U.S. relations with close ally Britain. Many Britons believe Washington is treating BP too harshly, to the detriment of British pension funds and other investors who have big stakes in the company.

The U.S. Senate Foreign Relations Committee plans to ask BP officials to testify after the company said it had lobbied the British government in 2007 over a prisoner transfer agreement with Libya.

U.S. Secretary of State Hillary Clinton told Britain’s foreign minister in a phone call on Friday that Britain may want to communicate with the U.S. Congress about Libyan intelligence officer Abdel Basset al-Megrahi release.

The Scottish government denied on Friday it had any contact with BP before its decision last year to release the Libyan.

U.S. lawmakers also are considering a range of new rules that could impose tougher safety regulations on offshore drilling or bar companies like BP from new offshore exploration leases.

The Obama administration issued a revised offshore drilling moratorium this week after a previous six-month ban was struck down by the courts.

Additional reporting by Jeff Mason in Washington, Eric Onstad in London, Matthew Lynley in New York, Chris Baltimore in Houston and Alexandria Sage in Louisiana and Leigh Coleman in Mississippi; Writing by Timothy Gardner; Editing by Paul Simao

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