It's Official - Another BP Failure - Efforts To End Flow From BP Well Are Over, Coast Guard Says

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From Bloomberg:

BP Plc has given up trying to plug
its leaking well in the Gulf of Mexico any sooner than August,
laying out a series of steps to pipe the oil to the surface and
ship it ashore for refining, said Thad Allen, the U.S.
government’s national commander for the incident.

Undersea robots began sawing away damaged pipe today,
preparing for the first of those attempts, Allen said today at a
press conference in New Orleans. The new strategy, which is
subject to disruption by tropical storms and hurricanes, will
continue until relief wells being drilled can plug the damaged
well from the bottom, he said.

That will happen no earlier than August. BP on May 30 said
its “top kill” attempt to plug the well with mud and rubber
scrap had failed.

BP will try to install a snug-fitting “top cap” over the
gusher within 24 hours to 48 hours once the robots complete
severing the pipe. To get a good seal, BP needs a clean cut at
the top of the blowout preventer, a five-story stack of valves
that failed to prevent an April 20 blowout that killed 11 people
and started the spill, Allen said. Should the jet of oil and gas
drive the cap aside, another cap designed to let more oil escape
will be tried, Allen said.

“We’re talking about containing the well,” Allen said.
“We don’t want to restrict the pressure or flow down that well
bore because I don’t think we know the condition of it after the
top kill.”

Relief Wells

The drilling of a second relief well resumed May 30, Allen
said. It had been suspended for several days as BP and
government officials, including Energy Secretary Steven Chu,
weighed whether to use the rig that was drilling it to install a
second blowout preventer atop the damaged one. BP decided not
to, Allen said.

The odds of success for installing the oil-capturing system
are better than the 60 percent to 70 percent chances the company
gave for the top kill attempt that failed May 29, BP Managing
Director Robert Dudley said on NBC’s “Today” show. Cutting the
pipe may temporarily boost the flow of oil into the Gulf by as
much as 20 percent, Dudley said on CBS’s “Early Show.”

BP fell the most in 18 years in London trading today after
top kill failed to plug the worst oil spill in U.S. history. Top
kill was an effort to pump fluids into the well to hold back the
oil and gas long enough to allow a cement seal to stop the flow.
BP is now trying to capture the oil, estimated by government
scientists last week at 12,000 barrels to 19,000 barrels a day,
while it drills two relief wells to permanently stop the leak.

‘Risks Are Lower’

“This is a lower-risk activity than what we were doing
with the top kill,” Dudley said of the cap. “We’ve gone down
this path because the risks are lower. The engineering, while
not simple, is certainly simpler than what we were trying with
the top kill.”

Video on BP’s oil-spill website showed a circular saw
making preliminary cuts on a smaller pipe that’s part of the
riser, the cluster of lines that once extended from the well to
the drilling rig, said Jon Pack, a BP spokesman. Shears were
already grasping the riser, he said.

BP fell 63.35 pence, or 12.8 percent, to 431.45 pence at
3:39 p.m. in London, the biggest drop since 1992. The company
has dropped 34 percent since the Deepwater Horizon drilling rig
exploded on April 20.

Disappointed Hopes

“The market had hoped they’d get it under control and they
haven’t,” Peter Hitchens, an analyst for Panmure Gordon UK Ltd.
in London, said today in a telephone interview. Hitchens rates
the stock at “buy” and owns none. “Clearly, the damages and
costs are going to go up.”

President Barack Obama will meet today with the co-chairs
of his oil-spill commission and then give a statement, according
to a schedule provided by the administration.

BP plans “in a couple of weeks” to reverse the system of
pipes and hoses that injected mud into the well for top kill,
achieving another route to storage on the surface, he said. As
part of the top-kill effort, BP had to remove a tube from the
riser that was capturing as much as 6,100 barrels a day from the
well.

Engineers also are working on a free-standing riser pipe to
be installed later this month that would allow tankers to take
on oil, Dudley said. That equipment would include a quick-
disconnect coupling so tankers could depart ahead of a
hurricane, Dudley said on CNN today. Hurricane season starts in
the Gulf today.

Changing Winds

Southwest winds predicted this week would push oil from the
well to a wider area of the U.S. coast, the National Oceanic and
Atmospheric Administration said in a May 31 statement on its
website.

“Results indicate that oil may move north to threaten the
barrier islands off Mississippi and Alabama later in the
forecast period,” the agency said. As of yesterday, the Unified
Area Command in Robert, Louisiana, reported oil along 100 miles
(161 kilometers) of Louisiana coastline.

BP has spent $990 million on the spill response, according
to a statement today. The company has paid $39.4 million in
damage claims as of May 31, the unified command for the spill
response reported yesterday. BP reported 30,619 claims and has
denied none, it said.

BP needs the equivalent of a lottery win to succeed with
its first attempt with a relief well, David Rensink, president-
elect of the American Association of Petroleum Geologists, said
in an interview.

Permanent Seal

The relief well aims to intercept the damaged hole at an
angle thousands of feet below the seabed and permanently close
it with heavy mud and cement. The method is the surest way for
BP to end the largest oil spill in U.S. history, yet initial
failure is “almost a certainty,” Rensink said.

“What you’re doing is trying to intersect a well bore that
is probably roughly a foot across with another well that is
about a foot across,” he said. “It’s a hit-or-miss sort of
thing. Ultimately the relief well will work. It’s just a matter
of time, of continuing to poke at it until you intersect it.”