BP oil spill under criminal investigation
Updated on 02 June 2010
As BP faces a criminal investigation, Channel 4 News Business Correspondent Siobhan Kennedy says BP boss Tony Hayward may not survive the Gulf spill, while science producer Nick Scott-Plummer assesses the company's future.
The US government has opened an investigation into whether the oil giant broke any laws in its handling of the spill.
The news came as BP suffered a 15 per cent plunge in its share price yesterday, after its efforts to block the oil well in the Gulf of Mexico with mud and debris – known as "top kill" - were unsuccessful over the weekend.
BP is now using robot submarines, working some 5,000 feet under water, to cut through the oil pipe at the well.
The plan is to connect a containment cap that will capture most of the oil and gas flowing from the well and then transport it to a drillship on the surface. The cap is expected to be in place by the end of the week.
However, the company admitted today that all of the operations carried out by the remote devices are "complex, involve risks and uncertainties".
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Some systems involved "have never been deployed at these depths and conditions, and their efficiency and ability to contain the oil and gas cannot be assured", BP added.
In the meantime, oil will continue to spew into the Gulf until the completion of the relief wells - which BP says will not be finished until August.
More than 1,600 vessels are now involved in the relief effort, which has scooped some 321,000 barrels – or 13.5m gallons – of oily liquid from the sea.
According to US reports, BP is paying local fishermen up to $3,000 a day to help clean up the oil.
BP's chief executive Tony Hayward said: "This planned multi-step containment strategy is our best option for achieving this as we work hard towards completing the relief wells that will kill this well completely."
Tony
Hayward may not survive the disaster
The company has now lost more
than a third of its value since the crisis began, writes Siobhan
Kennedy, Channel 4 News business correspondent.
Analysts have
said the cost of the clean-up operation – and associated legal challenges which
have been coming in thick and fast – could mean that BP will be forced to cut
its shareholder dividend in an effort to save cash.
The pressure is also
mounting on Tony Hayward, BP’s embattled chief executive, who stoked fresh anger
when he said: "There's nobody who wants this over more than I do. I want my life
back."
Industry insiders have said it’s becoming increasingly difficult
for Mr Hayward to survive the disaster. One said the US Government would likely
demand that heads roll in the wake of the crisis and it was inevitable Mr
Hayward’s would be top of the list – despite the fact he is well liked and
respected within the industry.
Iain Conn, BP's head of refining and
marketing and Bob Dudley, the former chief executive of BP's joint venture in
Russia, have been tipped as the most likely candidates to replace him.
Mr Hayward said the clean-up operation would continue to focus on Louisiana. "We're going to continue to maintain our guard with respect to Mississippi and Alabama and Florida, but this has been going on for 45 days now, and there is no oil on any of those 3 states."
BP said yesterday that around 30,000 claims have been submitted, of which the company has so far settled half – to the tune of $40m. No claims have been denied to date.
The group has received more than 110,000 calls to its help lines.
The total cost of the response to date has soared to around $990m (£682m), BP said.
"It is too early to quantify other potential costs and liabilities associated
with the incident," it warned.
The group's shares tumbled as much as 15
per cent in response, sliding to 420 pence - the biggest daily drop in 18 years.
Shares in BP have now shed 35 per cent of their value since the disaster struck more than six weeks ago, wiping £40bn off the company's market value.
On April 20 the Deepwater Horizon rig explosion killed 11 workers and triggered the oil spill in the Gulf of Mexico. Estimates vary, but it is feared up to 95,000 barrels of oil could be leaking into the ocean every day.
BP
- mired in the red stuff
While the Gulf of Mexico might be mired in
the black stuff, BPs accounts are a sea of red ink thanks the massive ongoing
cost of the disaster, writes Channel 4 News science producer Nick
Scott-Plummer.
More than £15bn has been wiped off the company's
market value so far today as the financial markets responded to the latest
failure to stem the Gulf of Mexico oil spill.
BP confirmed over the
weekend that its "top kill" plan to block the well with mud and cement had not
been successful. It's next attempt - "cut and cap" is a difficult operation to
slice off a ruptured pipe and then cap the top of the damaged blow-out preventer
before funneling oil to surface ships.
BP acknowleges that this won't
contain all the oil and as with all of their operations have been warning that
it's untested at the immense depths being operated in.
And there is
little optimism from oil analysts that this will succeed. BP has been mounting
its engineering solutions in order of probability of success - "cap and cut" is
the sixth on their list and a complicated procedure. Many with financial
interests in the company are now bracing themselves for the likelyhood the leak
won't be stemmed until late July or early August when two relief wells are
finally completed.
All this will add to the already eye-watering numbers
BP is facing. According to Peter Hutton, oil analyst at NCB stockbrokers, around
1.2 million barrels of crude oil will have leaked into the Gulf - nearly five
times the total of the Exxon Valdez disaster.
He also estimates that BP's
costs are going to leap. Initially the company was spending around $18m per day,
and most recently $35m per day. But he predicts that could rise to $46m per day
before the oil flow is halted. And while the company's bill so far for the
operation and clean up is just under $1bn, many are predicting the final sum for
BP could be around $12bn.
Much of that will be the cost of meeting tens
of thousands of compensation claims. According to BP 30,000 "economic injury"
claims have so far been filed against the company and $40m already paid
out.
President Obama has also weighed in, ordering BP to pay doctors'
fees for any "ill-effects" caused by the spill. In a country as litigious as the
United States this phrase will no doubt be interpreted widely. Mark Lanier, a
Houston- based lawyer for one group of plaintiffs, has said the litigation
against BP would make the Exxon Valdez spill look like an "oil leak in a car"
adding: "This is going to be, in my estimation, the largest tort (injury claim)
we have had in this country."
So where does this leave beleaguered BP -
public enemy number number one along the Gulf Coast and among many on Capitol
Hill? Dougie Youngson, oil analyst at Arbuthnot, said: "This could break BP.
This situation has gone far beyond concerns of BP's Chief Executive Tony Hayward
being fired, or shareholder dividends being cut. It's got the real smell of
death."
But Peter Hutton at NCB warned against predicting the oil
goliath's demise, saying that the company wasn't structurally at risk and that a
"1,001 things" would have to happen before a takeover could be
considered.
This afternoon BP's submarines have begun cutting pipes on
the underwater stack. BPs chief operating officer Doug Suttles said: "We're
confident the job will work, but obviously we can't guarantee
success."
Far worse than failure, though, is the possiblity that this
could make things worse. Engineers are predicting that the flow oil gushing into
the Gulf could rise by 20 per cent before the cap is in place.
And while
the probabilities of success of subsequent engineering schemes would get ever
longer, the probabilities of BP boss Tony Hayward surviving would surely get
shorter.
Deepwater to hotwater?
US Attorney General Eric Holder
announced last night that the federal government was launching criminal and
civil investigations into the spill.
BP, alongside Transocean Ltd and Halliburton Co, was warned to keep hold of all its paperwork in the event that a legal investigation was launched.
Meanwhile, Democrats have taken aim at BP, with Congressman Ed Markey branding the spill an "environmental crime" and Senator Mary Landrieu demanding BP invest $1bn in wetlands protection.
Exxon and on
Under current US laws, BP is only expected
to bear the cost of $75m of damages - although some analysts say Congress may
now boost that to $10bn. Any cap on damages paid would of course disappear if BP
was to be found negligent.
The legal bill for Exxon after the Valdez oil spill in 1989, previously the worst oil spill in US history, was reduced to $507.5m with $500m in interest payments.
The company had originally set aside $5.4bn for legal settlements, with the clean-up costs ringing in at $3.4bn.
Renowned
marine biologist and veteran of the Exxon Valdez spill Prof Rick
Steiner, writing for Channel 4
News, "the catastrophe has magnified
exponentially".
"With the failure of the Top Kill attempt, the
catastrophe has magnified exponentially. This was the last chance to kill this
well before the relief wells can kill the well from the bottom. We are likely
now in this for months to come."
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