Oil in gulf may be double initial estimate | Globalnews.ca (2024)

LONDON/HOUSTON – Supportive comments from the U.K. government helped lift BP Plc’s battered shares on Friday, outweighing news that the British oil company’s Gulf of Mexico spill is much bigger than previously estimated.

Responding to moves by U.S. officials to grab more BP cash for the cleanup, British ministers heeded calls to defend the U.K.’s biggest payer of share dividends and stand up to perceived Britain-bashing by President Barack Obama.

"We are all concerned about the human and environmental impact and as the Prime Minister has said we understand the concerns of the U.S. administration," Chancellor of the Exchequer George Osborne said after speaking to BP chief executive Tony Hayward by telephone.

"The Prime Minister is also clear that we need constructive solutions and that we remember the economic value BP brings to people in Britain and America," Osborne added after calls from business leaders, politicians and newspapers to defend BP.

A cartoon in the right of centre Daily Telegraph showed Britannia, an emblem of national pride, dropping her shield and clutching her helmet as Obama delivers a kick to her behind.

An editorial in the newspaper said Britain should avoid a diplomatic rift with its long-term ally but defend itself against Obama’s "distinctly unhelpful" and "aggressively jingoistic" language.

"I don’t frankly think we’re going to reach a solution, stopping the release of oil into the ocean any quicker, by allowing this to spiral into a tit for tat diplomatic and political spat," Britain’s deputy Prime Minister Nick Clegg told delegates at a business forum during a visit to Spain.

Shares in BP, which has lost tens of billions of dollars in value since the well exploded on April 20, gained 7.25 per cent to 392 pence, rebounding from Thursday’s 13-year low and extending a rally that began in New York on Thursday.

"Possibly people have taken heart from the fact that the political rhetoric is not just one side of the Atlantic," said Barclays Capital analyst Lucy Haskins.

A spokeswoman for Prime Minister David Cameron told reporters he was looking forward to a call with Obama planned for Saturday and expected it to be "statesmanlike and workmanlike".

Investors appeared unfazed by news after the U.S. market closed on Thursday that the well’s flow rate may be as high 40,000 barrels (1.68 million gallons/6.36 million liters) per day – twice as much as previously thought.

Worries over BP’s dividend payments have also contributed to severe pressure on the company’s stock.

U.S. politicians want BP to suspend it and divert cash to cover the cost of the clean up, even though the company has said repeatedly that it will foot the bill for tackling the biggest spill in U.S. history.

"We are considering all options on the dividend. But no decision has been made," BP Chief Executive Tony Hayward told the Wall Street Journal.

The newspaper said BP – once Britain’s biggest company by market value – may cut or defer the dividend due to be announced on July 27 or offer scrip – an IOU to shareholders.

Friday’s share rise does little to mend damage done to BP shares over the last two months – the company is currently worth just over 70 billion pounds ($102 billion) versus over 120 billion pounds when the spill hit.

U.S. scientists said on Thursday that between 20,000 and 40,000 barrels per day (840,000 and 1.7 million gallons/3.2 million and 6.4 million litres) of oil flowed from the well before June 3, when BP’s remotely operated robots sawed through an underwater pipe to clear the way for a capping procedure.

That is twice the level of previously estimated – although many experts had predicted a sharp incresae in the estimate.

U.S. Interior Secretary Ken Salazar told a congressional panel on Wednesday that the cut itself may have increased the rate by a further 4 to 5 per cent.

"CRISIS JUST BEGINNING"

Based on a rate of 40,000 barrels per day, the stricken well could have spewed as much as 2 million barrels (84 million gallons/317 million of liters) of oil since it ruptured on April 20, eight times the amount that the Exxon Valdez spilled into Prince William Sound in Alaska in 1989.

BP says it has collected 73,324 barrels (3.1 million gallons/11.7 million litres) of oil since installing the capping system.

"Even if BP were to shut off the flow today, this crisis is just beginning," said John Hocevar, the Oceans Campaign Director for Greenpeace USA.

The new estimates, in which BP had no input, could have huge financial implications because under the Clean Water Act, BP and others could face fines up to $4,300 for every barrel leaked .

The wide variation in the estimates in the flow rate points to the difficulty in estimating a flow 1 mile (1.6 km) beneath the surface and reachable only by remotely operated robots.

BP says it is capturing more of the torrent of oil that has gushed from the sea bottom since the April 20 rig explosion that killed 11 workers and set the disaster in motion.

But the almost 16,000 barrels it said on Thursday it had collected in the previous 24 hours was triple its initial estimates of the leak’s total flow rate, a point that will not be lost on critics as U.S. public and political anger mount.

As the spill spread, heavier concentrations of oil began washing up on Florida seashores late on Wednesday. Until then, debris from the spill had been limited in the state to relatively small tar balls.

The spill has soiled 120 miles (190 km) of coastline and threatens lucrative fishing and tourist industries.

Images of oiled pelicans and other wildlife are further stoking public anger with both the government and BP.