BP Gulf well cap working so far

BP Plc's stricken oil well showed no sign of leaking on Friday after a new cap stopped crude flow into the Gulf of Mexico, but President Barack Obama cautioned there was more work to do before the gusher was permanently stopped.

BP conducted a pressure test on the well after choking it off with the new seal and cap on Thursday. Underwater robots scanned the sea floor for signs of oil leaks, which could mean the undersea well was damaged.

"We've seen no negative evidence of any breaching there," said Kent Wells, BP's senior vice president of exploration and production.

Obama, speaking at the White House, cautiously welcomed the news. "We won't be done until we actually know that we've killed the well and that we have a permanent solution in place. We're moving in that direction, but I don't want us to get too far ahead of ourselves."

The president is under fire to push BP to permanently plug the leak and clean up the mess as it harms the environment and economy across five states of the Gulf of Mexico. The spill has cut into multi-billion dollar fishing, tourism and drilling industries.

BP's shares inched higher in London on Friday on hopes that it has at last been able to stop the oil that has been leaking for the past three months and can focus on the cleanup.

After up to 48 hours of tests, BP aims to siphon all the oil coming out of the well with the seal installed this week and send it a mile up to ships on the water's surface.

The tests will show whether the well and cap are b enough to contain the oil if those vessels must disconnect during a hurricane or other emergency that may occur before relief wells permanently plug the leak.

A First

It was the first time BP managed to cap the flow since the April 20 explosion that killed 11 men and caused the worst offshore oil spill in U.S. history. The disaster has devastated fragile communities and ecosystems along the Gulf, hurting local economies and jobs.

Investors remained cautious as previous attempts to stop the leak did not work. Many in battered coastal communities remained skeptical as well.

"This is only the second day. I am not celebrating anything yet," said Cindy Nelson of Biloxi.

Estimates vary widely of BP's total costs, which will run on for many years as lawsuits wind their way through courts.

Three analysts surveyed by Reuters Insider television forecast BP will spend between $63 billion to $100 billion over the next 15 years in fines, cleanup costs and legal costs while analyst Peter Hutton at NCB Securities in London pegs total costs at $40 billion.

"It's relief all around to see that (undersea) camera with no oil coming out," said Hutton. "But people recognize that they're not completely out of the woods."

The battered shares more than halved in value during the first two months of the crisis, but have bounced by more than 40 percent since touching a low in late June. About $65 billion has been wiped off BP's market value since the rig explosion.

But investors welcomed reports that BP was moving closer to sealing the first deal in its planned $10 billion of non-core divestments to help pay for cleanup costs.

The company and bankers were finalizing details of the sales of assets, including some U.S. interests to Apache Corp, said CNBC and the Financial Times.

Political Environment

The good news about halting the oil flow in the Gulf was tempered by concern about BP's future in the United States.

The crisis has complicated U.S. relations with close ally Britain. Many Britons believe Washington is treating BP too harshly, to the detriment of pension funds and other investors there who have big stakes in the energy giant.

The U.S. Senate Foreign Relations Committee plans to ask BP officials to testify after the UK-based oil giant said it had lobbied the British government in 2007 over a prisoner transfer agreement with Libya.

U.S. Secretary of State Hillary Clinton told Britain's foreign minister in a phone call on Friday that Britain may want to communicate with the U.S. Congress about Libyan intelligence officer Abdel Basset al-Megrahi release.

The Scottish government denied on Friday it had any contact with BP before its decision last year to release the Libyan.

BP also faced new measures in the U.S. Congress. Lawmakers are considering a range of new rules that could require tougher safety regulations on offshore drilling or bar companies like BP from new offshore exploration leases.

The company will likely release the flow of oil again after the tests -- siphoning up to 80,000 barrels a day to ships until it can seal the well permanently.

That should be more than enough to capture the whole well output, as estimates put the spill rate at between 35,000 barrels (1.47 million gallons/5.56 million liters) and 60,000 barrels (2.5 million gallons/9.5 million liters) a day.

The British energy giant still expects to complete drilling a new well by early August to intersect the ruptured well -- which extends 2.5 miles under the seabed -- and seal it with mud and cement.

[Source: By Kristen Hays and Ross Colvin, Reuters, Houston and Washington, 16Jul10]

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