By Brian “Newman” Rayl
On Monday, July 12th 2010, BP p.l.c. (NYSE: BP), formerly known as British Petroleum, stated that they have placed a new cap onto the leaking oil well, offering hope of containing the gusher for the first time since the deep water rig exploded in April. The company plans to test the cap for the next 1-3 days to determine if the new cap can withstand the pressure that is emanating from the well head, though tests were delayed on Tuesday for undisclosed reasons. The cap itself weighs 150,000 pounds and should be capturing most or all of the oil by the end of the week according to the hopeful BP engineers.
BP’s leaking wellhead is a mile underwater, and the new capping stack installed on Monday was custom-built for the leaking well. BP claims that even if the new cap fails to completely shut down the spill, it will have the ability to siphon up to 80,000 barrels per day of oil from the blown-out well by mid-July and either burn it or store it aboard vessels on the surface.
If tests progress as hoped, BP said no oil would flow from the well for the first time since the deadly explosion. During the tests, two smaller siphoning systems, including one brought online on Monday, will be turned off. However, BP warned the outcome was uncertain since the system has never been tested at such depths.
On April 20th, the BP-operated Deepwater Horizon oil rig (owned by Transocean LTD (NYSE: RIG)) exploded at approximately 9:45 pm CDT, killing 11 crew members and wounding 17 others. 85 days later, oil continues to flow freely from the damaged well head at an estimated rate of 1.5-2.5 million gallons per day, with an estimated 88-174 million gallons having already spilled into the Gulf of Mexico, making this disaster the worst oil spill in U.S. history. Ironically, the very day that the rig exploded, there was a group of BP managers on hand for a ceremony celebrating 7 years on the Deepwater Horizon without an injury, according to a CBS (NYSE: CBS) News 60 Minutes report.
This was just the latest disaster for a company that is the largest oil producer in the United States. BP was found willfully negligent in a 2005 Texas refinery explosion that killed 15 of its workers. BP was hit with $108 million in fines — the highest workplace safety fines in U.S. history.
On Tuesday, July 14th, the U.S. Federal Government issued a moratorium on offshore drilling in the wake of the BP disaster, which will last through November 30th. This moratorium has been critized by Louisiana’s politial and industrial leaders, who say that their economy has already been devastated by the oil spill, and now will be harmed even further by the drilling moratorium. According to a study by Greater New Orleans, a regional economic development agency, the moratorium has already caused more than 12,000 job losses and more than $172 million in lost revenues since it was first introduced.
Contact the author at newman@marketplayground.com
Disclosure: No position in any security mentioned
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