BP to Start Burning Captured Gulf Oil at Sea
June 10, 2010 - 12:55 PMBP said Thursday that it plans to boost its ability to directly capture hundreds of thousands of oil gushing from a well at the bottom of the Gulf of Mexico by early next week.
Kent Wells, BP's senior vice president of exploration and production, said a semi-submersible drilling rig would capture and burn about 420,000 gallons of oil daily. Once on board, the oil and gas collected from the well will be sent down a boom and burned at sea.
A drill ship already at the scene can process a maximum of 756,000 gallons of oil daily that's sucked up through a containment cap sitting on the well head.
The containment effort played out as BP stock continued to plunge amid fears that the company might be forced to suspend dividends and find itself overwhelmed by the cleanup costs, penalties, damage claims and lawsuits generated by the biggest oil spill in U.S. history.
But markets were also beginning to heed warnings from analysts who said Wednesday's 15.8 percent sell-off of BP shares in New York was an overreaction. BP shares dropped as much as 11 percent to a 13-year low at the open in London on Thursday, then recovered some ground by early afternoon, trading 6.1 percent lower at $5.39. In New York, the stock opened 9.8 percent higher at $32.05.
BP has lost around half its market value since the spill began with the April 20 rig explosion that killed 11 workers and set off the spill in the Gulf. In the seven weeks since then, the company has lost half its market value. In a federal filing Thursday, the company said the cost of its response to the oil spill has grown to $1.43 billion.
The latest slide came after Interior Secretary Ken Salazar promised a Senate energy panel to ask BP to compensate energy companies for losses if they have to lay off workers or suffer economically because of the Obama administration's six-month moratorium on deep-water drilling. In an interview Thursday on ABC's "Good Morning America," Louisiana Sen. Mary Landrieu reiterated her call to end the moratorium, saying it will cause economic hardship in the region.
"Every one of these 33 deep-water wells employs, directly, hundreds of people and indirectly thousands," she said.
Cleanup continued along the Gulf Coast. In Orange Beach, Ala., reddish-brown globs of oil the size of credit cards littered the beach at the tide line as a blue farm tractor loaded with shovels and other cleanup equipment chugged down the beach. Dozens of workers in orange vests and blue jeans prepared to start their day combing the beach for oil.
Shrimpers, oystermen, seafood businesses, out-of-work drilling crews and the tourism industry who have filed damage claims with BP also are angrily complaining of delays, excessive paperwork and skimpy payments that have put them on the verge of going under as the financial and environmental toll of the seven-week-old disaster grows.
"Every day we call the adjuster eight or 10 times. There's no answer, no answering machine," said Regina Shipp, who has filed $33,000 in claims for lost business at her restaurant in Alabama. "If BP doesn't pay us within two months, we'll be out of business. We've got two kids."
BP spokesman Mark Proegler disputed any notion that the claims process is slow or that the company is dragging its feet.
Proegler said BP has cut the time to process claims and issue a check from 45 days to as little as 48 hours, if the necessary documentation has been supplied. BP officials acknowledged that while no claims have been denied, thousands and thousands had not been paid by late last week because the company required more documentation.
At the bottom of the sea, the containment cap on the ruptured well is capturing 630,000 gallons a day and pumping it to a ship at the surface, and the amount could nearly double by next week to roughly 1.17 million gallons, said Coast Guard Adm. Thad Allen, who is overseeing the crisis for the government.
A second vessel expected to arrive within days should greatly boost capacity. BP also plans to bring in a tanker from the North Sea to help transport oil and an incinerator to burn off some of the crude.
The additional system will use equipment previously employed to shoot heavy drilling mud down the well in an attempt to stop the flow, although this time the process will work in reverse. Oil will flow in lines from beneath the blowout preventer, a stack of piping on the sea floor, to a semi-submersible drilling rig called the Q4000.
Oil and gas siphoned from the well will flow up the rig, where it will be sent down a boom, turned into a mist and ignited using a burner designed by Schlumberger Ltd. BP opted to burn the oil because storing it would require bringing in even more vessels to the already crowded seas above the leaking well.
"It was going to become too congested, it was not the safest way to do it," Wells said.
Testing on the oil-burning system should begin over the weekend, and full production should start early next week, Wells said.
The government has estimated 600,000 to 1.2 million gallons are leaking per day, but a scientist on a task force studying the flow said the actual rate may be between 798,000 gallons and 1.8 million. A task force member said an estimate come Thursday or Friday.
Crews working at the site toiled under oppressive conditions as the heat index soared to 110 degrees and toxic vapors emanated from the depths. Fireboats were on hand to pour water on the surface to ease the fumes.
Allen also has confronted BP over the complaints about the claims process, warning the company in a letter: "We need complete, ongoing transparency into BP's claims process including detailed information on how claims are being evaluated, how payment amounts are being calculated and how quickly claims are being processed."
Under federal law, BP is required to pay for a range of losses, including property damage and lost earnings. Residents and businesses can call a telephone line to report losses, file a claim online and seek help at one of 25 claims offices around the Gulf.
To jump-start the process, BP was initially offering an immediate $2,500 to deckhands and $5,000 to fishing boat owners. Workers can receive additional compensation once their paperwork and larger claims are approved. BP said it has paid 18,000 claims so far and has hired 600 adjusters and operators to handle the cases.
Associated Press writers Harry R. Weber in Houston, Jay Reeves in Orange Beach, Ala., Eileen Sullivan and Seth Borenstein in Washington contributed to this report. Ray Henry reported from New Orleans.
(Copyright 2010 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)