BP Lowers Containment Cap onto Wellhead But Uncertainty Remains

By | June 4, 2010

BP Plc managed Thursday to lower a containment cap onto its ruptured deep-sea wellhead in the Gulf of Mexico in a high-stakes bid to siphon off some of the oil billowing from its gusher.

U.S. President Barack Obama canceled his trip set for this month to Australia and Indonesia to deal with the ongoing oil spill crisis and other matters, White House spokesman Robert Gibbs said. The oil spill, which began in April, is causing an ecological and economic disaster along the U.S. Gulf Coast.

Obama, whose reputation is on the line over the spill, scheduled his third visit to the Gulf Friday.

The U.S. Coast Guard in a statement said British energy giant BP had successfully attached the cylindrical well cap onto the jagged top of the crippled wellhead assembly using underwater robots.

“The placement of the containment cap is another positive development in BP’s most recent attempt to contain the leak, however, it will be some time before we can confirm that this method will work and to what extent it will mitigate the release of oil into the environment,” Coast Guard Admiral Thad Allen said in the statement.

“Even if successful, this is only a temporary and partial fix and we must continue our aggressive response operations at the source, on the surface and along the Gulf’s precious coastline,” he added.

Earlier, a live video feed of the blowout site, located on the ocean floor about a mile down, showed the device being placed as oil and gas continued to billow up.

The latest attempt to collect at least some of the escaping crude oil and siphon it safely to collection ships on the surface offers the most immediate hope of gaining control over the worst oil spill in U.S. history.

Earlier on Thursday, BP’s robot submarines sheared away the oil-spewing well pipe after two days of attempts, clearing the way for the lowering of the cap. Following the success, BP Chief Executive Tony Hayward said the next 12 to 24 hours would determine whether the capping operation will succeed.

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

BP’s financial outlook — its shares have fallen sharply since the spill began — was further clouded as two credit-rating agencies downgraded the company’s debt, reflecting assessments that the company faces lasting damage.

Oil has been pouring into the Gulf unchecked at a rate of up to 19,000 barrels a day since an explosion April 20 that demolished a BP-contracted drilling platform off the coast of Louisiana, killing 11 crewmen and unleashing an environmental disaster of epic proportions.

BP has said it does not expect to be able to fully halt the oil flow until August, when two relief wells are due for completion, despite mounting pressure from the public and the U.S. government.

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

Obama, seeking to contain political fallout from the disaster, planned to visit the Louisiana Gulf coast again 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” broadcast 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.

He also cited research suggesting that a powerful hurricane could help break up the far-flung oil slick, and that a smaller tropical storm could be worse for the spill because it might leave the slick more intact while washing it further inland. [ID:nN03264725]


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 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 previously found in the Keys were determined to be unrelated to the blowout.

Ratings agencies Moody’s and Fitch Ratings downgraded BP’s credit ratings 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.

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.”

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.”

The 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.


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 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 Gorman; Editing by Paul Simao and Will Dunham.)

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