Gulf Oil Spill Declared ‘Effectively Dead’

U.S. officials said BP has finally plugged the leaking Macondo well in the Gulf of Mexico – 153 days after an explosion caused the death of 11 oil-rig workers and the largest offshore oil spill in U.S. history.

John Wright, the driller responsible for drilling the relief well to seal the Macondo well, the source of the Deepwater Horizon rig explosion and oil spill, speaks in the drilling shack of the Development Driller III, after cement was poured into the well to seal it, in the Gulf Of Mexico, off the coast of Louisiana, Saturday, Sept. 18, 2010. Photo: Reuters

“The Macondo 252 well is effectively dead,” said National Incident Commander Thad Allen in a statement today. BP completed its last pressure test on the plugs at 5:54 a.m. local time before declaring the well sealed, according to the statement.

“Additional regulatory steps will be undertaken but we can now state, definitively, that the Macondo well poses no continuing threat to the Gulf of Mexico,” he added.

Mr Obama welcomed the news but cautioned that the road ahead “will not be easy” as the focus switches to rebuilding damaged Gulf communities.

In a statement, President Obama hailed the work as an “important milestone in our response to the BP oil spill.” He said the government remained committed “to doing everything possible to make sure the Gulf Coast recovers from this disaster.”

The government said that oversight for the well would now pass from the National Incident Command, which is headed by Admiral Allen, to the Bureau of Ocean Energy Management, Regulation and Enforcement, an agency of the Department of the Interior.

The 87-day spill, triggered by an April 20 rig explosion that killed 11 workers, tainted hundreds of miles of U.S. coastline. The well leaked more than 4m gallons of oil before it was temporarily capped on July 15.

The disaster also cost BP chief executive Tony Hayward his job, took $70 billion off BP’s market value and brought new drilling in the Gulf to a standstill. About 400 lawsuits are pending and the trial judge overseeing those predicted hundreds more will be filed.

BP expected the permanent plug to be finished in July, but bad weather caused complications. The 75-ton cement plug was finally fitted 2.5 miles below the surface five months after it started leaking.

The well leaked 5,000 barrels – 210,000 gallons – of oil a day. It has so far cost BP $8bn in clean-up and other costs – though the final bill will dwarf that.

BP is grappling with lawsuits from businesses whose livelihoods were affected by the spill, including fisherman and environmental workers. It also faces a compensation bill from the state of Alabama for $148m.

In June, US President Barack Obama forced the company to set aside a $20bn compensation fund – though BP does not expect to have to pay so much. If it is found guilty of gross negligence, BP could face a further $18bn in penalties.

It is also expected that another series of plugs will be required by the US Bureau of Ocean Energy Management, Regulation and Enforcement before BP can abandon the well. Meanwhile, industry peers are worried about the ramifications for deep water drilling.

“The whole industry is terrified it could happen to them,” said Peter Hitchens, an analyst at Panmure Gordon. “The whole way we drill wells could actually change. They’re going to take a lot longer. They’re going to be a lot more scrutinised.”

Oil companies ExxonMobil, Chevron, ConocoPhilips and Royal Dutch Shell have pledged $1bn towards developing technology that can capture oil underwater should there be a deep-sea blowout in the future.

BP has attempted to deflect blame for the incident, publishing an internal report earlier this month that sought to share responsibility with Transocean, the owner of the Deepwater Horizon drilling rig, and contractor Halliburton.

BP expects to demobilise a fleet of drilling rigs and other ships that have been stationed at the well for months. That fleet has included two drillships, three drilling rigs, production vessels, tankers and ships that operated underwater robots.

Marshalling shareholder support in the City may take longer, however. The explosion prompted BP to suspend its dividend payments for the first time in 18 years. BP was previously responsible for 15pc of all the dividend income in Britain. Restoring that is one of many challenges for new chief executive Bob Dudley. [Bloomberg, CBS News and MSN]

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