Oil spill costs have topped £1bn, says BP
Monday 07 June 2010
Beleaguered BP today said the total cost of the oil spewing into the Gulf of Mexico had hit more than 1.6 billion US dollars (£1.1 billion) so far.
The firm's latest attempt to contain the crisis - a "containment cap" placed on the well - gathered 16,600 barrels of oil in its first three days of operation.
But the mounting bill includes 1.25 billion US dollars (£862 million) on efforts to stop the flow of oil, grants to Gulf states, and claims paid to those affected - as well as 360 million dollars (£249 million) pledged for a Louisiana project to build barrier islands to keep oil from the coastline.
The effectiveness of BP's cap - installed by robot submarines a mile below the sea surface last week - is set to improve but it is still well short of capturing all of the oil from the leak, estimated at 12,000 to 19,000 barrels a day.
Analysts at Goldman Sachs cut their rating on the firm and said BP could suspend dividend payments for two quarters to help fund the rescue effort.
"The ultimate cost to BP from the Gulf of Mexico spill is impossible to know with certainty at present, given uncertainties over the total size of the spill, its impact on the local economy and longer-term impacts on BP's competitive position in the Gulf of Mexico and beyond," the investment bank warned.
BP admitted today that it would be "a few days" before the success of the project is known, while fears are mounting for the clean-up operation as the hurricane season fast approaches.
US Coast Guard Admiral Thad Allen, who is overseeing the US government's response to the spill, warned that the battle to contain the oil is likely to stretch into the autumn.
BP is working to increase the efficiency of the containment cap, which has been fitted to the top of broken valves on the seabed to transport captured oil and gas to a ship on the surface.
The group is putting in place an additional containment system, using the pipes from the failed "top kill" operation to block the well, which it said should be in place by mid-June.
It is also working on a way to make the cap system "more permanent" and flexible during the hurricane season.
But BP warned: "This is a complex operation, involving risks and uncertainties, being carried out 5,000 feet under water.
"The LMRP containment cap never before has been deployed at these depths and conditions, and its efficiency and ability to contain the oil and gas cannot be assured."
Meanwhile, two relief wells are being drilled below the seabed to intercept the spilling well, although these will not be completed until August.
The company has also launched huge efforts to tackle the spill on the surface and protect the coast, but it has been heavily criticised in the US over its response since the Deepwater Horizon rig exploded and sank on April 20, killing 11 workers.
BP chief executive Tony Hayward and the management team have come under pressure over their positions at the helm.
Mr Hayward has insisted he would not quit and had the "absolute intention of seeing this through to the end".
However, the US government has been vocal in its condemnation of the group, in particular attacking BP about a recently launched advertising campaign to promote the company's efforts to fix the damage caused.
President Barack Obama said the money would have been better spent on clean-up efforts and on compensating fishermen and other small business owners affected by the incident.
BP has also faced anxiety from investors, worried over future dividend payouts which provide crucial income for millions of pension savers and account for around £1 in every £7 of blue-chip dividends paid each year.
The group said on Friday that it would "meet our obligations" to investors, but has not given any firm commitment, saying only that dividend payouts would be discussed by the board.
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