Tuesday, June 15, 2010
Jun 15: Potential cost estimates for the overall BP oil spill disaster continue to climb, with talk in the $50 billion range (up from $20-30 billion); the company's market price holds at about $98 billion (down about $80 billion); and the company's credit rating was cut to BBB from AA by Fitch, one of the three big credit agencies. The President will speak to the nation this evening from the Oval Office following his two day visit to the Gulf. Then, tomorrow he will meet directly with BP officials. Media reports are beginning to surface over a possible lever the Administration may have over BP -- i.e. mineral leases valued at $55 billion which the government controls. The New York Post is reporting on a possible tradeoff where BP keeps its leases and agrees to some sort of $50 billion Gulf Oil cleanup fund including payments to businesses and individuals that have suffered economically.
BP indicates that it has spent some $1.6 billion to date on the cleanup and compensation. BP announced that it has approved initial payments toward 90% of commercial large loss claims that have been filed as a result of financial losses of the Deepwater Horizon incident and spill. Using an accelerated process BP approved payments of 337 checks for a total amount of $16 million to businesses that have filed claims in excess of $5,000. Initial payments began over the weekend and will be completed this week. The remaining outstanding commercial large loss claims are awaiting documentation and are continuing through the process.
BP indicated that the acceleration of commercial large claims payments will help ease the burden on impacted businesses by providing access to money in a short period of time. Improvements to the commercial large claims process have been made as a result of applying learning from the existing individual claims process, as well as consultations with local, state, Department of Homeland Security and United States Coast Guard officials. BP also announced a number of future process improvements.
BP's Claims Team said, "We hope that these changes will help those whose businesses and livelihood have been hurt by the oil spill. "We are working hard to fine-tune our claims process so that it's as simple, straightforward and effective as possible. We will keep doing everything we can to address the impact of the spill on the Gulf region." The company said to date, it has opened 25 claims offices and issued approximately 25,000 claims checks totaling $63 million. By the end of the week it expects to have paid out $85 million inclusive of these initial large loss claims payments.
The lower marine riser package (LMRP) containment cap, installed on June 3, continues to collect oil and gas flowing from the MC252 well and transport them to the Discoverer Enterprise drillship on the surface. In the first 12 hours of June 13 (midnight to noon), approximately 7,720 barrels of oil were collected and 16.9 million cubic feet of natural gas were flared. On June 12, a total of approximately 15,000 barrels of oil were collected and 32.9 million cubic feet of natural gas were flared. The total volume of oil collected by the LMRP cap system since it began operation is approximately 127,000 barrels. A further approximately 22,000 barrels of oil previously had been collected through use of the Riser Insertion Tube Tool and stored in the Discoverer Enterprise.
In the early evening of June 10, the Flow Rate Technical Group (FRTG), which is led by United States Geological Survey Director Dr. Marcia McNutt, and a scientific team led by Energy Secretary Steven Chu provided an update on their analysis of new data and bringing together several scientific methodologies to develop an updated estimate of how much oil is flowing from BP's leaking oil well in the Gulf of Mexico. Dr. McNutt announced that three of the scientific teams analyzing flow rates have reached updated assessments, based on new data or analysis, of flow rates from BP's well before the riser was cut on June 3. [Note: most experts have commented that the flow rate would increase following the riser cut, e.g. +10-20%).
The FRTG reported that the Plume Modeling Team which has originally estimated 12,000 to 25,000 barrels of oil per day updated its estimate to between 25,000 to 30,000 barrels per day, but could be as low as 20,000 barrels per day or as high as 40,000 barrels per day. The Mass Balance Team which had originally estimated 12,000 to 19,000 barrels of oil per day refined its estimate and has concluded that the best estimate for the average flow rate was in the range of 12,600 to 21,500 barrels of oil per day. The Reservoir Modeling Team and the Nodal Analysis Team are continuing to work on independent estimates that will be completed later this month (See link below for details on estimates).
On June 9, BP submitted a plan to the Unified Area Command outlining a plan to build additional capacity and redundancy for the containment of oil. In summary the plan called for various elements that might result in recovery of 20-28,000 bbl/day by mid-June and 25-38,000 bbl/day by mid-July. Another "permanent riser system" is proposed to recover as much as 40-50,000 bbl/day. On June 11, Federal On-Scene Coordinator Rear Adm. James Watson's issued a letter directive to BP to build greater capacity and redundancy for oil containment to address the revised and "substantially higher flow of oil from the well." Watson said, ". . .your current plans do not provide for maximum mobilization of resources to provide the needed collection capacity consistent with the revised flow estimates." Watson requested a response from BP within 48 hours.
On June 15, BP also announced that it was making its first round of funding for a half-billion dollar pledge to the Gulf of Mexico Research Initiative (GRI). Three research institutions in the Gulf region will receive a total of $25 million in fast-track funding for high-priority studies of the distribution, composition and ecological interactions of oil and dispersant. Three initial studies will help establish critical baseline data as the foundation for subsequent research. In this first round of funding, GRI is providing: $5 million to Louisiana State University; $10 million to the Florida Institute of Oceanography (FIO) hosted by the University of South Florida; and $10 million to the Northern Gulf Institute (NGI), a consortium led by Mississippi State University (NGI).
Access a report on BP credit rating (click here). Access NYP report on the $50 billion deal (click here). Access a BP release on recent response progress (click here). Access a release on the new FRTG flow estimates with links to details on each method (click here). Access links to the exchange of letters on increasing the recovery capacity (click here). Access a BP release on the GRI (click here). Access additional information updates and links to releases and briefings on the Administration's response from the Unified Command website (click here). Access the BP response website for links to visuals more information on the recovery work (click here).