July 14, 2010

Article at Reuters

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BP delays new cap test to avoid inconclusive result

HOUSTON (Reuters) - BP PlcBP.NBP.N said on Wednesday a 24-hour delay in a key pressure test on a cap on its Gulf of Mexico wellhead was needed to reduce risks as it works to stop oil that has been spewing for months into the ocean.

A pressure gauge is pictured as work continues at the site of the BP oil well spill in the Gulf of Mexico, in this image captured from a BP live video feed July 13, 2010. REUTERS/BP/Handout

While they waited for BP to start critical integrity tests originally scheduled for Tuesday, investors paused for breath as they watched to see how well the new cap worked to stop oil from leaking out of the burst Macondo well.

Kent Wells, senior vice president of exploration and production at BP, told reporters that scientists delayed the test to make sure it “was absolutely designed to maximize what we would learn from it and minimize any risk under all possible scenarios.”

“This test is so important that the decision was taken to give them another 24 hours to make sure that this was the best possible test procedure we could execute,” said Wells.

BP announced on Tuesday evening it had delayed the procedure after consultations with scientists and engineers from the industry, government and the oil company.

Wells said BP would look at the latest information around midday on Wednesday and decide if any changes are needed for the tests before moving forward.

The tests, which could mark a turning point in the massive environmental disaster, would last between six and 48 hours.

Officials said they were running more analysis on the cap before trying to close the wellhead after previous efforts to halt the worst offshore spill in U.S. history failed.

“BP don’t want to mess it up. It’s better to be safe than sorry, they’ve already learnt that,” said analyst Peter Hitchens at Panmure Gordon in London.

“The last thing you want to do is try to start capping it and find out you’re causing damage to the well and the whole containment system gets broken down.”

In response, shares in BP shed 3.7 percent in London in slow trade and about 2 percent in New York, with investors likely cashing in profits ahead of further news on the new cap, Hitchens said.

BP stock, at Tuesday’s peak, had risen about 40 percent since touching a low in late June. At its low, the firm had lost more than half its market value, with some investors wondering if BP might even go out of business.

A public relations problem for BP opened on another front on Wednesday as three senior U.S. senators called on the oil giant to suspend drilling plans off the coast of Libya in response to reports BP lobbied the British government to release Lockerbie bomber Abdel Basset al-Megrahi to Libya.

The reports said the British-based company urged the government to support the prison transfer, which may have encouraged Libya to finalize an offshore drilling deal with BP.

But amid the reports another vote of confidence in BP’s future came from British Foreign Secretary William Hague, who said it had a healthy future as a stand-alone company.

Hague made the comments during a visit to Beijing while responding to speculation China may buy assets from BP.

“We haven’t had that raised in these talks. Our position is BP has got to do what it’s doing in the Gulf of Mexico, but it’s still in a strong position as an independent company. I’ve not had any approach from China to do with BP at all.”

Rumors have swirled recently about BP’s plan to sell $10 billion in non-core, upstream assets to help fund clean-up costs.

The group announced one small downstream divestment on Tuesday, but said the sale had been planned before the spill and was not part of the current asset sales programme.

BP sold Magellan Midstream Partners L.P.MMP its crude oil storage tanks in Cushing, Oklahoma and related petroleum pipelines for $289 million.

If tests progress as hoped, BP said no oil would flow from the well for the first time since a rig being drilled for BP by Transocean LtdRIG.NRIGN sank days after the April 20 explosion that killed 11 workers.

During the tests, two smaller siphoning systems, including one brought online on Monday, will be turned off. But BP warned the outcome was uncertain since the system has never been tested at such depths.

If the cap put in place on Monday is not sealed, BP intends to contain the whole of the oil flow by mid-July by siphoning it off through pipes to ships at the surface.

BP’s leaking wellhead is a mile (1.6 km) underwater. The new 160,000-pound (73-tonne) capping stack installed on Monday was custom-designed and built for the leaking well.

The only proven way to permanently kill the leak lies in the drilling of relief wells to intercept the ruptured one. The first of two such wells started in May is expected to intercept it by the end of July and plug it with drilling mud and cement by mid-August.