BP set to install bigger cap on leaking Gulf well

Fri Jul 9, 2010 7:50pm EDT
 
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By Dan Whitcomb and Jeff Mason

MALIBU, Calif./NEW ORLEANS (Reuters) - BP was set on Friday to install a bigger cap that could contain almost all the oil leaking from its blownout Gulf of Mexico well, a top U.S. official said.

The Obama administration has been pressing the British energy giant to install the new cap, which could capture up to 80,000 barrels (3,360,000 gallons/12,700,00 liters) of oil a day, versus the 25,000 barrels currently being contained.

The government has estimated the well is leaking a maximum of 60,000 barrels a day, although independent estimates have been as high as 100,000 barrels a day.

Retired Coast Guard Admiral Thad Allen, who is overseeing the response to the spill, told a news conference that the well could be contained -- but not plugged -- by Sunday or Monday, when the cap was installed on top of it.

"When we have the cap on, and it's sealed and we know that we've got a seal, yes" (it will be contained), Allen said.

BP has been under enormous pressure to halt the oil, which has polluted coastlines on all five U.S. Gulf states, threatened multi-billion dollar fishing and tourism industries and killed birds, sea turtles and dolphins.

It is the worst offshore oil spill in U.S. history.

The company's costs for the spill likely will be tied to the amount of oil that ultimately flows out of the well.

Allen, however, reiterated that the well will not be plugged until two relief wells were completed, expected to be in mid-August. He said later BP had responded to a government request to lay out a timeline for installing the new cap.

"We're reviewing it right now," Allen told Reuters. "If there are no problems with it, we'll probably authorize them to move ahead later on this evening."

"It looks like it's achievable at this point if we remain on schedule," Allen said. "If we approve the timeline, we would start tomorrow to remove the current cap and to start the sequence of events."

MORATORIUM UNCERTAINTY

The spill has complicated the U.S. relationship with Britain, while subjecting Obama to fierce criticism that his handling of the disaster has been too slow.

The administration reiterated on Friday that it would announce a new deepwater oil drilling moratorium, a pledge that came after a U.S. appeals court refused to reinstate a six-month ban on drilling below 500 feet.

"In the next several days we'll be making an announcement about keeping the moratorium in place," Interior Secretary Ken Salazar said during a visit to California.

"It will be a new moratorium," he said.

The government imposed the ban in response to the BP spill, but a federal judge last month blocked the move. In refusing to stay that decision on Thursday, the 5th U.S. Circuit Court of Appeals said the government failed to show how it would be irreparably harmed if it were not granted.

The administration said it did not consider the ruling a major setback because the Interior Department had the power to apply to stop any deepwater drilling project in the Gulf.

"Our view on the moratorium is that it was right when it was issued and it's right today," Salazar said.

Companies and other critics of the administration's ban have warned that it is too broad and could push oil drillers to abandon U.S. waters, spurring job losses at a time of economic hardship, particularly in Gulf states.

U.S.-based Diamond Offshore Drilling said on Friday it was moving its Ocean Endeavor rig to Egypt from the Gulf of Mexico, becoming the first U.S. company to do so because of uncertainty surrounding the ban.

The court ruling pushed shares of Transocean Ltd, the owner of the rig that exploded on April 20, triggering the spill, up more than 5 percent on the Zurich stock exchange on Friday.

They had lost almost half their value since April.

BP, which has seen its share price plummet by about half during the crisis, closed fractionally higher, after rallying to gain about 25 percent from a low over the past two weeks.

Investors have been cheered by reports that BP is seeking new investors and speculation that the worst of the spill might be over.

(Additional reporting by Kristen Hays in Houston, Braden Reddell in San Francisco, Ayesha Rascoe and Steve Holland in Washington; Writing by Ed Stoddard and Patricia Zengerle; Editing by Paul Simao)