The leaking well owned by BP plc (NYSE: BP) has now led to a cessation of new permits for drilling offshore the US, including Alaska. Royal Dutch Shell plc (NYSE: RDS-A) has permits in the works to begin drilling exploration wells at its offshore leases in the Chukchi and Beaufort Seas. The federal government had already postponed a planned lease sale offshore of Virginia.

The BP crew working to stop the 5,000 b/d flow of oil into the Gulf has retrieved a part of the damaged blow-out preventer (BOP) from the sea floor and will try to repair and reinstall it in an effort to get an accurate reading of the pressures at the leaking wellhead.

If the attempt works, two outcomes are possible. One, the pressure at the wellhead is low enough to allow BP to shear off part of the riser package on the sea floor and install a second BOP, owned by Transocean Ltd. (NYSE: RIG), on top of the first. At that point, BP would try to kill the well with the new BOP, which presumably is operating properly.

If the pressure at the wellhead is too high, the company could try to inject a heavy fluid into the existing BOP in an effort to kill the well.

The company has said that it will not try anything that has a chance of making the leak worse. That’s why it’s so important to get an accurate reading of the wellhead pressure.

An Transocean-owned BOP apparently failed earlier this year at an offshore well site near India. A company spokesman said that Transocean does not know the “cause of the fire and explosion,” but that it is continuing its investigation.

The containment dome arrived at the well site in the Gulf yesterday and is being lowered to the sea floor where it will be placed over the end of the broken pipe that is spewing about 85% of the leaking oil into the sea. A Transocean drillship is scheduled to link up with the dome by a 2-foot diameter riser enclosing a 6-5/8-inch drill string that will lift the trapped oil to the surface where it will be shipped to shore and stored at a BP refinery.

One relief well has been started, but will take up to three months to be get to the 18,000 foot depth of the leaking well. A second relief well will be started in about 10 days. It’s worth noting that a relief well is really the only way to stop the leak permanently. The domes and repaired BOP are only temporary measures until a relief well is in place to kill the flow of oil.

Now that the oil slick has made landfall in the barrier islands of Louisiana, the situation is getting even more critical. The larger the slick grows, the more vulnerable it is to getting swept toward Florida’s panhandle or west of the mouth of the Mississippi River, a prime US fishing ground.

BP’s newest ‘worst case scenario’ suggests that as much as 60,000 b/d of oil could start spewing from the leaking well. That’s 2.5 million gallons/day, about 10X in one day as is estimated to have been spilled when the Exxon Valdez coated Alaska’s Prince William Sound with oil in 1989.

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