Day 46 BP Oil Spill Crisis: Cap Installed; A Presidential Visit

Jun 4: BP reports that the lower marine riser package (LMRP) cap was placed on top of the LMRP at approximately 8:35 PM CDT on June 3. Gas first reached the Discoverer Enterprise at approximately 11:00 PM CDT on June 3; oil followed at approximately 11:10 PM CDT. Operations are progressing as planned; increasing the flow of oil and gas to the surface and reducing the amount entering the Gulf of Mexico. Media reports at mid-morning on June 4, indicated an initial recovery rate of 1,000 barrels per day; however, 4 vents in the cap were still open and scheduled to be closed periodically throughout the day to increase the recovery rate. The Unified Command reports that BP is attempting to reduce nitrogen pressure in the riser, gradually closing vents in the cap and trying to prevent hydrates.

    This afternoon, President Obama was traveling to the Gulf Coast and expected to speak with individuals and business leaders likely that have been affected directly by the economic consequences of the spill, and continue to get from Admiral Allen a firsthand update on the progress, both in dealing with the well and in dealing with the spread of pollution that has leaked from the well.

    BP's Chairman Carl-Henric Svanberg and Group Chief Executive Tony Hayward told shareholders that the company's response to the Gulf of Mexico oil spill is their top priority, along with rebuilding trust and confidence in BP and ensuring that such an accident never happens again. Both Svanberg and Hayward expressed their deep regret and sorrow for the tragedy. Svanberg underscored the company's commitment to mitigating damage from the oil spill and said, "The Board of BP has been clear from the outset that all resources available to the company should be applied to meeting BP's responsibilities in addressing these events. The task is by no means complete and we have a long way to go. This is a tough job and Tony and the team continue to work relentlessly. They have all our support.

    "In conjunction with the US authorities, a massive response has been mobilized which is focused immediately on containing and stopping the flow of oil. We will also continue to apply all of the necessary resources to the aftermath, both in the clean-up operation and in remediation and payment of legitimate claims. These are our most critical and immediate tasks. We will meet our obligations both as a responsible company and also as a necessary step to rebuilding trust in BP as a long term member of the business communities in the US and around the world. This is in the interest of all our stakeholders."

 

    In commenting on the significant financial costs of the incident, the company officials said: BP has already spent over $1 billion in gross direct costs for the response, clean up and relief wells; Spending at this rate is expected to continue for some time beyond successful completion of work to stop the flow of oil from the damaged well. Any fines and penalties would present additional costs; The costs of containment, removal and clean up are likely to be largely complete in 2010; and The longer-term costs of environmental remediation, claims and litigation are not predictable at this stage, but they will be sizeable and are likely to be spread over many years. [Note: BP stock has fallen from around $60/share at the time of the accident/spill to a current price of under $38/share].

 

    Hayward said, "Everyone at BP is heartbroken by this event, by the loss of life and by the damage to the environment and to the livelihoods of the people of the Gulf Coast. It should not have happened and we are bound and determined to learn every lesson to try and ensure it never happens again. We will stand by our obligations. We will halt this spill and put right the damage that has been done. We will rebuild the confidence of the American people and the world in BP."

 

    In its March presentation, prior to the Gulf of Mexico incident, BP indicated that its cash inflows and outflows were balanced at an oil price of around $60/barrel [oil is currently just under $72/barrel]. Now, Hayward said, "Under the current trading environment we are generating significant additional cash flow. In addition, our gearing is currently below the targeted range, and our asset base is strong and valuable, with more than 18 billion barrels of proved reserves and 63 billion barrels of resources. All of this gives us significant flexibility in dealing with the costs of this incident." BP said it will create a separate stand-alone organization to manage the long-term response once the spill is over. Managing Director Bob Dudley will lead this new organization reporting directly to the Group Chief Executive. 

 

    The Interagency Alternative Technology Assessment Program (IATAP) workgroup, newly established by the National Incident Commander for the BP Deepwater Horizon oil spill, announced a new effort to collect and review oil spill response solutions from scientists and vendors. The Coast Guard's Research and Development Center (RDC), in collaboration with interagency partners, issued a Broad Agency Announcement on the FedBizOpps website, calling for the submission of white papers that cover: oil sensing improvements to response and detection; oil wellhead control and submerged oil response; traditional oil spill response technologies; alternative oil spill response technologies; and oil spill damage assessment and restoration.

    According to a release, the IATAP and the RDC will screen and triage submissions based on technical feasibility efficacy and deployability. This will be a Federal process to ensure a fair, systematic, responsive and accountable review of alternative response technologies by interagency experts. The IATAP and RDC initial screening will result in one of three determinations: the white paper has a potential for immediate benefit to the oil spill response effort; the white paper submission needs more detailed investigation or evaluation by the appropriate government agency; or the white paper submission does not support this incident.

    The IATAP workgroup, established by Adm. Thad Allen, the national incident commander, includes the U.S. Coast Guard, National Oceanic and Atmospheric Administration, Department of Interior, Minerals Management Service, U.S. EPA, and the Department of Agriculture.

 

    National Incident Commander Admiral Thad Allen discussed the administration's aggressive oversight of the BP claims process from start to finish that will ensure that every legitimate claim is honored and paid in an efficient manner, and its strong commitment to providing residents with full, streamlined access to available assistance programs. The administration will continue to hold BP responsible for all removal costs and damages associated with the BP oil spill, including efforts to stop the leak at its source, reduce the spread of oil and protect the shoreline and mitigate damages, to the maximum extent possible under the law. According to a release the federal government is closely monitoring the BP claims process from outreach to language accessibility to intake to adjustment to payment.

 

    This week, the Integrated Services Team conducted site visits in Louisiana, Mississippi and Alabama to gather information about challenges faced by individuals, families and small businesses that have been impacted by the spill. Within the Integrated Services Team, field-based interagency teams are being established for each state to identify gaps in the claims process for resolution by BP. These teams are led by a single Federal Resource Coordinator and a state point of contact identified by Gulf Coast Governors. BP reports that 34,656 claims have been opened, from which more than $45.9 million have been disbursed. No claims have been denied to date, and there are more than 516 claims adjusters on the ground. At the request of the Federal government, BP is providing daily reports tracking claims to ensure the Federal government has full visibility throughout the entire process.

 

    The latest June 4, operations report from the indicates: Total active response vessels: more than 1900; Containment boom deployed: more than 2.04 million feet; Containment boom available: more than 747,000 feet; Sorbent boom deployed: more than 2.30 million feet; Sorbent boom available: nearly 2.10 million feet; Total boom deployed: more than 4.34 million feet (regular plus sorbent boom); Total boom available: more than 2.91 million feet (regular plus sorbent boom); Oily water recovered: nearly 14.97 million gallons; Surface dispersant used: more than 765,000 gallons; Subsea dispersant used: more than 256,000 gallons; Total dispersant used: more than 1,021,000 gallons; Dispersant available: more than 450,000 gallons; and Overall personnel responding: more than 20,000 personnel responding.

    Access a release from BP on the cap placement and LMRP operation (click here). Access a lengthy BP release on its report to shareholders (click here). Access the BP response website for links to visuals on how the LMRP is supposed to work (click here). Access additional information updates and links to releases and briefings on the Administrations response from the Unified Command website (click here). Access EPA's environmental monitoring site (click here). Access the White House website on the BP spill which contains links to all Federal agency response websites and more (click here). Access a release on the IATAP workgroup and link to more information (click here). Access the FedBizOpps announcement (click here). Access a release and links to more information on the claims process and oversight (click here). Access links to all live underwater video feeds (click here).