BP Is Capturing 10,000 Barrels a Day From Gulf Spill, Chief Hayward Says

Sunday, June 6, 2010
By Paul Martin

By Edward Klump

June 6 (Bloomberg) — BP Plc plans to increase the oil- capture rate from its leaking well in the Gulf of Mexico as the company tries to contain the worst oil spill in U.S. history.

BP is collecting around 10,000 barrels of crude a day, Chief Executive Officer Tony Hayward told the British Broadcasting Corp. today in a live interview in London. The well is estimated by government scientists to be gushing 12,000 to 19,000 barrels into the Gulf every day.

A “cap” over the well is capturing “probably the vast majority” of the leaking oil, Hayward said. BP has “a further containment system to implement this week,” he said, adding that a permanent and hurricane-proof mechanism will be in place by the end of the month.

U.S. Coast Guard Admiral Thad Allen said yesterday in a news conference that four vents on the cap remained open, allowing oil to flow through the cap and into the ocean. BP will try to close the vents when pressure is stabilized, Allen said. On June 4, Allen said BP was recovering oil at the rate of about 1,000 barrels a day. BP said yesterday that it collected 6,077 barrels of crude in the 24-hour period of June 4.

“They are making adjustments to the systems and making sure they don’t increase the production rate until it’s safe to do so,” Allen said.

Improvement Expected

After the cap was put in place the night of June 3, gas reached a surface ship at about 11 p.m. local time, and oil was being piped to the ship about 10 minutes later, BP said yesterday on its website.

“Improvement in oil collection is expected over the next several days,” the London-based company said yesterday on its website.

The system can capture as much as 15,000 barrels a day, and BP will push toward that limit, Allen said.

“I’d like to see us capture 90-plus percent of this flow,” Doug Suttles, BP’s chief operating officer for exploration and production, said June 4 on CBS’s “Early Show.” “That’s possible with this design.”

The shears used to prepare the well for the cap created a cut that was more jagged than had been hoped for, so there is isn’t a perfect seal between the cap and the well, Allen said. The company won’t know how bad the leakage is until it is capturing more oil, he said.

History Lesson

“History has taught us here to be cautiously optimistic, not overly optimistic,” Dan Pickering, an analyst at investment bank Tudor Pickering Holt & Co. in Houston, said yesterday. He said capturing 90 percent of the flow would be a “huge home run.”

The spill, which has cost BP more than $1 billion, has soiled about 140 miles of shoreline in Louisiana, Alabama and Mississippi, along with some 80 miles in Florida, the Coast Guard said yesterday.

Gulf winds are moving the oil now in the water closer to the coasts of Mississippi, Alabama and Florida, Allen said. He said oil in tar balls and patties is affecting areas from western Mississippi to Pensacola, Florida.

The well began gushing oil after the Deepwater Horizon rig BP leased from Transocean Ltd. exploded on April 20 and sank two days later, resulting in the deaths of 11 workers. The leak is 40 miles (64 kilometers) off Louisiana’s coast under about 5,000 feet of water.

Obama, Hayward

President Barack Obama said communities along the Gulf Coast suffering because of the oil spill will be “made whole” with payments from BP and government aid. In his weekly address on the radio and Internet, which was taped June 4 in Grand Isle, Louisiana, Obama said livelihoods that have spanned generations are in danger of being lost.

BP’s Hayward told the BBC he hadn’t spoken directly to Obama since the Deepwater Horizon rig exploded.

“There is no need for that,” Hayward said. “I have spoken to his key lieutenants.” BP and the Obama administration are working “hand-in-hand” to resolve the spill, Hayward said.

The company has paid about half of the 35,000 claims submitted by Gulf residents and companies for income lost because of the spill, Darryl Willis, vice president of resources at BP America, said yesterday on a conference call. BP is awaiting documentation for the other claims, he said. Willis said the company’s claims spending through June may top $84 million.

‘First Call’

Hayward told investors June 4 on a conference call the spill has the “first call” on the company’s funds and financial consequences of the spill will be “severe.”

Allen said relief-well operations to stop the leak will involve pumping mud to reduce pressure and placing a cement plug. He said this effort will be the “bottom kill exercise.” Allen said the “worst case” he sees is that a discharge continues until relief wells are completed in August.

“In the long term, the threat from this well will not go away until the relief well has been drilled, pressure has been taken off and the well has been plugged,” Allen said. “In the meantime, we need to optimize our containment efforts.”

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