BP Spent $8B on Oil Spill, Plans to Resume Relief Well

LONDON (Dow Jones Newswires), Sep. 3, 2010

Oil major BP said Friday it has spent around $8 billion to date in response to the massive oil spill in the Gulf of Mexico and expects to resume its relief well drilling shortly.

The costs to date include cost of the spill response; containment; relief well drilling; the "static kill" operation of providing mud and cementing; grants to the Gulf states; claims paid; and federal costs. Since July 15, no new oil has flowed into the Gulf of Mexico from the Macondo well, the company said in a statement.

BP said more than 42,000 claims have been submitted by individuals and businesses since the claims processing was transferred over to the Gulf Coast Claims Facility on Aug. 23. The claims relate to compensation sought for damages resulting from an explosion in April on the Deepwater Horizon rig, which caused the U.S.'s largest offshore oil spill. BP had made 127,000 claims payments, totaling about $399 million to date.

BP warned Friday that its cleanup efforts could be hindered under congressional legislation designed to punish the company by constraining its operations in the Gulf. The U.S. House of Representatives passed a bill July 30 that includes a ban on Gulf of Mexico drilling permits for any company with more than 10 fatalities at its offshore or onshore facilities. Eleven workers died when the rig BP was leasing exploded in the Gulf of Mexico.

"If we are unable to keep those fields going, that is going to have a substantial impact on our cash flow," said BP America executive David Nagel, according to a New York Times website article. This "makes it harder for us to fund things, fund these programs," he said, referring to additional costs that the company may have to pay.

A BP spokesman Friday wasn't immediately able to comment on the New York Times article.

BP faces a huge challenge to raise funds in the wake of the environmental disaster. The oil major plans to raise $30 billion from asset sales to help meet the cost of the spill. So far, the company has raised just shy of $10 billion from asset sales, a company spokesman said.

BP is now focused on replacing the Deepwater Horizon drilling rig's failed blowout preventer, a contraption which is designed to prevent oil leaks, with the blowout preventer from the Development Driller II rig in order to resume drilling on the relief well.

Depending upon weather conditions, BP expects the relief well will intersect with the the area between the Macondo well's drilling pipe and the surrounding rock formation around mid-September.

BP said no volumes of oily liquid have been recovered since July 21 and the last controlled burn operation occurred on July 20. BP continues to conduct overflights and other reconnaissance to search for oil on the surface.

BP said about 28,400 personnel, more than 4,050 vessels, and dozens of aircraft are still engaged in the response effort.

BP's skimming operations have recovered a total of more than 826,000 barrels of oily liquid and a total of 411 controlled burns have been carried out, removing around 265,000 barrels of oil from the open water.

Copyright (c) 2010 Dow Jones & Company, Inc.