BP sees progress on new oil containment system

HOUSTON Mon Jul 12, 2010 11:42am IST

Oil gushes from BP's ruptured well in the Gulf of Mexico, in this frame grab captured from a BP live video feed on July 11, 2010. REUTERS/BP/Handout

Oil gushes from BP's ruptured well in the Gulf of Mexico, in this frame grab captured from a BP live video feed on July 11, 2010.

Credit: Reuters/BP/Handout

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HOUSTON (Reuters) - BP Plc(BP.N)(BP.N)said on Sunday it is making progress on a new system to capture almost all the oil spewing from its blown-out well in the Gulf of Mexico and a relief well could finally plug the leak by early to mid-August.

"We're pleased with our progress," BP senior vice president Kent Wells told reporters on a conference call.

It will take up to a week for robots working 1 mile (1.6 km) underwater to completely fit a new cap and seal. Oil will flow mostly unchecked until the bigger containment system is installed, further hurting tourism and fishing in all five states along the Gulf Coast.

The British energy giant, which is also drilling two relief wells to try to permanently plug the leak, hopes the new containment system will funnel as much as 80,000 barrels (12.7 million liters) per day of oil to vessels on the surface -- more than three times the current amount.

It expects the first of the relief wells to intercept Macondo by the end of July, a first step in plugging the well by early to mid-August.

BP is also on track to start a rig on Sunday evening that can siphon up to 25,000 bpd from the well, Wells said.

The Obama administration has pressed BP to take advantage of calm weather and move forward with the containment.

Senior Obama adviser David Axelrod, asked on the "Fox News Sunday" program about hopes the spill will be contained by the end of July, said he was "reasonably confident but obviously this thing is uncharted waters."

BP, which has set up a $20 billion spill fund under pressure from the White House, removed a smaller containment cap from the gushing well on Saturday.

On Day 83 of the disaster, U.S. Attorney General Eric Holder said the Justice Department has started interviewing witnesses as part of a criminal and civil investigation into the worst oil spill in U.S. history.

For full spill coverage link.reuters.com/hed87k

Insider TV link.reuters.com/qyk76m

Graphics link.reuters.com/fuc76m

LIABILITIES AND COSTS

BP shares have been hammered by the disaster and are likely to remain volatile until the well is capped and the company's total costs and liabilities are clear. Some analysts have put BP's likely costs at $20 billion to $40 billion but estimates have gone as high as $100 billion.

Speculation is running high that BP is approaching several sovereign wealth funds for cash to ward off a takeover and to help pay for the spill. BP boss Tony Hayward met with an Abu Dhabi state investment fund last week.

In Britain, The Sunday Times newspaper said BP is in talks to sell up to $12 billion in assets, including a stake in Alaska, to Apache Corp (APA.N).

Holder said the U.S. investigation could apply to other companies involved in the drilling of the damaged well.

"We are in the process of accumulating documents, talking to witnesses on both the criminal side as well as the civil side," he told the CBS program "Face the Nation."

The investigation is aimed at ensuring no tax dollars pay for the cleanup "and to make sure that we hold accountable anybody who was responsible for the spill," Holder said.

If the Justice Department finds violations, penalties could be in the many billions of dollars.

FRUSTRATION

People living at the heart of the crisis expressed frustration over the pace of the cleanup.

For Billy Nungesser, president of Plaquemines Parish in Louisiana, the top priority is more boats to mop up oil.

"Number one is a sense of urgency," he said. "To get out on the water to work 24/7. We have to be on the front lines."

Nungesser said he was due to meet two Obama administration officials on Sunday, a day before its first commission hearings on the spill in New Orleans.

The administration's commission consists of seven engineers, environmentalists and former politicians who plan to investigate decisions by oil companies and government regulators that may have led to the disaster.

The panel will hear testimony from government officials, businesses groups like the Louisiana Shrimp Association, and BP's Wells through Tuesday.

As the spill hit local economies, animal welfare groups are distributing donated dog food to Plaquemines Parish fishermen and others to help struggling owners keep their pets.

Donna Schexnayder of the Plaquemines Animal Welfare Society said she has noticed more pets being given to the shelter and expects the number to grow. "We're starting to see it a little more," she said. "Within the next month or so, it will hit."

Cherie Pete teared up as she described the changes confronting fisherman who are now mopping up oil.

"Now they have the hard hats on, and the tags around their necks," Pete said. "They don't look like our men. Our total way of life has already changed."

Her home was completely submerged by Hurricane Katrina in 2005. But she considers the oil spill worse.

"You get something like this -- I mean, Katrina was a category 5," she said about the maximum rating a storm can muster. "As far as I'm concerned this is a category 10."

(Additional reporting by Alexandria Sage in Louisiana and Jeremy Pelofsky and Lesley Wroughton in Washington; Writing by Timothy Gardner; editing by John O'Callaghan and Todd Eastham)

(For more news on Reuters India, click in.reuters.com)

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