Tuesday, June 29, 2010

Storm to slow US oil spill containment ramp-up

NEW YORK: High winds and large waves expected in the Gulf of Mexico as the first named storm of the Atlantic hurricane season passes to the west are likely to slow efforts to contain the largest oil spill in US history.

As costs associated with the spill mount, shares in London-based energy giant BP Plc(BP.L) are languishing near 14-year lows, prompting the New York Federal Reserve to investigate potential systemic risks posed by the company.

The Gulf oil crisis is in its 71st day with no firm end in sight. The economic and ecological costs -- to tourism, wildlife, fishing and other industries -- continue to mount for four states along the US Gulf coast.

Tropical Storm Alex, forecast to reach hurricane strength on Tuesday, is projected to travel well west and south of the undersea gusher about 50 miles off the Louisiana coast.

But plans to move a third containment vessel to the leaking well could be pushed back by about a week by high waves associated with Alex, a BP spokesman said on Monday.

US government officials estimate that 35,000 to 60,000 barrels are leaking from the blown-out well each day.

BP's current containment system can handle up to 28,000 barrels daily. The planned addition would have raised that to 53,000 bpd, said Kent Wells, a senior vice president with BP.

Deep below the ocean floor, drilling of a pair of relief wells intended to plug the leak for good by August will continue "unless, unfortunately, a storm heads directly our way," Wells said.

The first relief well is now tantalizingly close to the blown out well -- just 20 feet (6 meters). But BP said on Monday it will be drilled another 900 feet (275 meters) before an attempt is made to intercept the rogue well.

BP's market capitalization has shrunk by hundreds of billions of dollars since the Deepwater Horizon drilling rig sunk in 5,000 feet (1,525 meters) of water on April 22, two days after an explosion and fire killed 11 workers.

The company continues to publicly stand behind Tony Hayward, its embattled chief executive.

On Monday, sources said that the New York Federal Reserve has been monitoring firms' exposure to BP to ensure that if the oil giant buckles it will not put the global financial system at risk.

"The Fed gave banks' exposure to BP a passing grade," said one of the sources, on condition of anonymity.

Still, some of BP's trading partners, such as Credit Suisse, are tightening collateral requirements imposed on the company, CNBC reported on Monday.

Top US officials continue to beat a path to the Gulf region, responding to criticism that President Barack Obama and his administration responded too slowly to the crisis. Vice President Joe Biden heads to the region on Tuesday.

Polls have given Obama low marks for his handling of the disaster, although not as low as those given to BP.

On Monday, former president Bill Clinton told CNN that Obama was getting "a bum rap." The failed well is a "geological monster" and if efforts to cap the leak should fail, the US Navy might have to blow it up, Clinton added.

As crude oil and dispersants float on the surface of the Gulf, crews are battling to keep filth off beaches and away from wildlife breeding grounds. Rough weather created by Alex would be just the latest blow to the hard-hit region.

Parts of the Louisiana shoreline are under a coastal flood watch through Wednesday evening. High tides could be two to three feet above normal in some locations.

Skippers and deckhands at the public marina in Pointe-a-la-Hache, Louisiana, said they were worried about what impact the water's already high level will have if Alex pushes foul weather toward them.

"If a storm comes with the tide, then it's going to be an issue," said Robert Whittington, who has worked at the marina for 20 years. "We're just waiting to see what happens."

In Ocean Springs, Mississippi, residents angry about BP's slow spill clean-up took it upon themselves to pick up tar balls making landfall. After waiting hours for clean-up crews, young children and their parents began digging up large patches of the oil with sand toys and shovels.

"That is all we had to use and we were not going to sit around and wait for BP to pick this mess up. It is our home," said area resident Marty Wagoner.

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