June 28, 2010 / 12:28 AM / in 7 years

Storm threatens spill cleanup, BP says CEO to stay

HOUSTON/LONDON (Reuters) - A growing storm delayed efforts to capture more oil gushing into the Gulf of Mexico as BP Plc and Russia’s government traded words on Monday over the future of the energy giant’s chief executive.

The Federal Reserve Bank of New York, probing the exposure of big financial firms to the British energy giant, gave banks a “passing grade,” one source told Reuters.

High waves from tropical storm Alex will delay BP’s plan to add more oil-siphoning capacity to its leaking well until next week, a company executive told reporters in Houston, while state officials said Alex would hinder clean-up efforts.

Alex is the first in a new season of storms, raising concern about prolonged efforts to get control of the undersea leak that has spewed oil since April 20, threatening fisheries, tourism and wildlife in four states along the U.S. Gulf Coast.

Kent Wells, BP executive vice president of exploration and production, said the current siphoning systems should not be affected “unless unfortunately a storm heads directly our way.” But waves as high as 12 feet would delay hooking up a third system to capture oil, he said.

In London, BP said Tony Hayward was still its CEO, with no change under discussion, after Russian Deputy Prime Minister Igor Sechin said he expected the embattled boss to resign soon and Moscow to be told the name of his successor on Monday.

Adding credence to BP’s statement, Sechin’s office said later that management changes were not raised when he met Hayward, who has been criticized over his response to the disaster and was in Russia to address Moscow’s worries about BP’s local operations in the leak’s wake.

ALEX STORMS INTO GULF

Forecasters at the National Hurricane Center said Alex was expected to become a hurricane on Tuesday, with winds of 96-110 mph by late on Wednesday before striking near the Texas-Mexico border and moving inland.

Shell shut subsea production at two platforms and BP evacuated some personnel from three platforms due to the threat of Alex, the companies said on Sunday.

Florida officials said swells churned up by Alex would hinder clean-up operations.

“Over the next several days the winds and current are going to hamper some offshore operations and the current is going to be pushing things more onto shore,” said state meteorologist Amy Godsey.

While a hurricane could also interrupt BP’s efforts to cap the well, some specialists say the heavy weather could actually help mitigate environmental damage by dispersing the oil.

U.S.-listed shares of BP rose about 3 percent in morning trade on Monday, the first session after a sell-off that sent the stock to a 14-year low, but faded in the afternoon to close just 0.3 percent higher.

The shares, a staple of pension funds, have lost more than half of their value since the spill began two months ago and are down some 24 percent since the start of June.

The New York Fed has been probing exposure to BP to ensure Wall Street and the global financial system would not be at risk if the oil giant buckles under the costs of the spill, according to two sources familiar with the matter.

After poring over documents and asking banks about their exposure to BP over the past two weeks, the New York Fed found no systemic risk and had not asked firms to alter their credit relationships with BP, the sources told Reuters.

“The Fed gave banks’ exposure to BP a passing grade,” said one of the sources on condition of anonymity.

Beyond’s BP survival prospects, the examination underscores market uncertainty about how the spill’s staggering clean-up bill might affect Wall Street, a fragile economic recovery and the multitrillion-dollar energy market.

BP said on Monday its spending to cap the well, clean up the spill and compensate those affected had accelerated to $100 million a day, bringing the total so far to $2.65 billion.

The company has set up a $20 billion compensation fund under U.S. government pressure.

Kenneth Feinberg, the independent administrator of the fund, has said it made “absolutely no sense” to drive BP into bankruptcy, while promising to streamline the claims process and even let some victims file online.

BP’s earlier handling of compensation on its own came under fire as unduly bureaucratic and time-consuming.

Feinberg expressed doubt on Monday that compensation could stretch as far as a New Orleans strip club that says it has lost business because the fishermen who are its customers are out of work due to the spill.

“I don’t think they’ll get money out of this fund,” he said in an interview with Fox News, adding the $20 billion “should be reserved for the most directly impacted claims.”

LOUISIANA WORRIES

While Alex remained at a safe distance, people in southeastern Louisiana had more immediate concerns as lightning lit up the sky and a torrent of rain flooded roads.

Some residents were also concerned about BP and the Coast Guard’s continued use of chemical dispersants. On Monday, crews sprayed the material far offshore using airplanes.

Dispersants help oil dissolve within months, breaking it down into small particles that can be easily digested by organisms living in the Gulf.

But they are controversial as the long-term health implications are not clear. The Environmental Protective Agency is studying the use of dispersants.

“They should stop using them,” said Mary Tompkins of Nairn, Louisiana.

Nalco, the company that makes the primary dispersant being used, Corexit, says the product is safe in the environment.

“I don’t believe that,” Tompkins said. “They need to stop.”

U.S. Senator George LeMieux, a Republican, toured Pensacola Beach on the Florida Panhandle before returning to Washington to file a bill aimed at loosening restrictions he said prevented more oil skimmers from helping clean up the Gulf.

“There are 2,000 skimmers in the United States,” LeMieux said. “Why they are not all here, makes no sense to me.”

Additional reporting by Darya Korsunskaya and Katya Golubkova in Moscow, Jane Sutton and Michael Peltier in Miami, Ernest Scheyder in Nairn, Louisiana, Sarah Young in London and Joshua Schneyer and Kristina Cook in New York; Writing by Jerry Norton; Editing by Simon Denyer and John O'Callaghan

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