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BP Estimates on Gulf Oil Leak Are Slippery (BP, RIG, NLC)


Yesterday officials of BP plc (NYSE: BP) estimated that it was siphoning off 5,000 b/d of oil from the leak that started a month ago when the semi-submersible platform owned by Transocean Ltd. (NYSE: RIG) exploded and sank, killing 11 workers. They lowered that estimate to 2,200 b/d this morning and said they would provide more details about the decline later today.

Some experts have challenged BP’s estimate of the amount of oil leaking from the damaged well, with one estimate going as high as 95,000 b/d. So far, the US National Oceanic and Atmospheric Administration has backed BP’s estimate of the size of the leak.

If, as BP says, it was capturing 5,000 b/d yesterday and the video of the leaking wellhead still showed oil flowing from the leak, BP’s and NOAA’s estimate must certainly have been too low. BP admits that, but has still not revised its estimate.

Naturally, this has given rise to accusations that BP is covering up the extent of the spill, and Obama administration officials and at least one US Senator have as much as said so.

BP has also been directed to change the dispersant the company is using to try to break up the flow of oil from the well and to disperse the huge slick that is forming on the surface. Corexit, the dispersant that is to be replaced, is made by Nalco Holding Co. (NYSE: NLC) and BP has already used 655,000 gallons of the stuff, 600,000 gallons on the surface and 55,000 underwater.

Corexit is approved by the EPA for use in this sort of work, but BP has been using it in “unprecedented volumes” and little is known about the effects of using any dispersant underwater. The EPA “wants to ensure that BP is using the least toxic product authorized for use.”

BP is also preparing to try to kill the well early next week now that it has replaced the control module inside the blow-out preventer. The module controls the choke and kill valves that would kill the well. BP is currently taking measurements of the pressure at the leak to make sure that when the heavy mud is pumped into the well it won’t be forced back out by extraordinary well pressure.

Meanwhile, the first relief well has resumed drilling after stopping at 4,000 feet below the sea floor to be tested. Drilling of the second relief well continues as well.

It’s hard to argue that BP should be doing more. It is not hard to argue that the company has been less than forthcoming with public information about the size of the leak. The NOAA is not covering itself in glory on this either.

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