Oil spill executives face grilling

Oil spill executives face grilling
By Ed Crooks in London, Sheila McNulty in Houston, Anna Fifield in Washington and Harvey Morris in Venice, Louisiana
Copyright The Financial Times Limited 2010
Published: May 10 2010 14:03 | Last updated: May 11 2010 01:19
http://www.ft.com/cms/s/0/ec1c368a-5c26-11df-95f9-00144feab49a.html


Top officials from BP, Trans ocean and Halliburton are set to point the finger at each other in the first of a series of congressional hearings on Tuesday, as legislators look for answers following last month’s Gulf of Mexico oil spill.

“We intend to do everything within our power to bring this well under control, to mitigate the environmental impact of the spill and to address economic claims in a responsible manner,” Mr Mackay said in prepared testimony.

But he will repeatedly refer to the “Transocean Deepwater rig” and will say that Transocean owned the rig’s equipment, including the blow-out preventer, which was supposed to have cut off the well after the explosion.

Mr Newman will say that Transocean was operating under BP’s orders. However, he will note that the most unusual aspect of the accident is that the explosion happened after the well-construction process was finished. This pointed not to a failure of the blow-out preventer but of the cement casings laid by Halliburton, which were meant to control pressure from the reservoir, Mr Newman will say, according to his advance remarks.

All three will come under heavy questioning during the congressional hearings about the companies’ safety records and their preparedness for such a spill.

One BP insider said: “Everybody is braced for a pretty challenging session.”

House committees will start their own hearings from Wednesday.

Tony Hayward, BP’s chief executive, said in Houston on Monday that there would be “lessons to be learnt” on the reliability of blow-out preventers, the last line of defence against oil and gas spills that apparently failed in the explosion on April 20.

“We will undoubtedly see changes from the regulators, and the industry will make some changes too.”

However, he defended BP’s efforts to combat the spill, estimated to be running at 5,000 barrels a day, saying the resources mustered to contain the slick had been much greater than for any previous incident in US waters.

“We have done, in many people’s view, a very good job of controlling the spill.”

BP said it had spent $350m on trying to contain its oil spill in the Gulf of Mexico, raising the prospect that the cost of the clean-up alone could exceed $1bn.

Analysts have suggested the total bill for the slick could come to $10bn (€8bn, £7bn) for BP, including compensation claims for lost earnings from the fishing and tourist industries of the region, as well as punitive damages.

BP’s efforts have been insufficient to stop small quantities appearing on the coasts of Louisiana and Alabama. The operation to control the leak at the seabed in 1,525 metres of water have been improvised as the incident has developed, because there is no precedent for a spill at such a depth. Attempts to close valves on the blow-out preventer and to drop a container over the leak to collect the oil have both failed.

BP is now preparing to stem the flow of oil with a “junk shot”: filling the well with debris, followed by heavy fluids, followed by cement to seal it.

That effort could take two weeks. It runs the risk of opening the well further, potentially raising the rate of oil escape to 60,000 barrels a day, although Mr Hayward described the risk as “very, very low”.

BP is also preparing another containment dome to trap the oil and pump it to the surface. This dome, known as a “top hat”, would be smaller than the one that proved ineffective at the weekend.

Oil has been seen in patches of thick crude on a beach at the mouth of the South Pass, one of the navigable channels of the Mississippi, in a “sheen” around islands off the coast of Louisiana, and in small balls of tar washed up on a beach 50 miles farther east on the coast of Alabama.

BP’s shares fell 1 per cent on Monday as most other shares rose.