BP (BP) is drawing up plans for multiple approaches to halt its oil spill in the Gulf of Mexico, to be rolled out over the next few weeks. If those efforts fail, it will be months before the company's ultimate solution -- relief wells -- can be drilled and begin operating. And even that solution is fraught with risk, since the attempt could make matters worse if a second blowout and explosion at proposed relief wells should occur, as public documents reveal.
During a Monday press briefing, BP CEO Tony Hayward outlined three strategies to contain and seal the leak. He said all were being advanced simultaneously.
The first effort, which involved placing a four-story tall containment dome over the largest leak that would allow the spewing oil to be funneled to a tanker on the surface, failed over the weekend. The structure became filled with ice-like hydrate crystals largely composed of oil and gas, which blocked the tubes that would've taken the oil to the tankers.
BP is following up that failure with a second attempt, this time using a smaller dome, which BP is planning to try by Thursday. The hope is that the smaller dome will limit the amount of seawater involved, thereby eliminating the hydrate crystals problem. BP has even gotten Environmental Protection Agency approval to inject methanol into the smaller dome to aid the process if necessary.
"Relief Wells Ultimately Will Be Successful"
Should the smaller dome plan also fail, a series of attempts to get the so-called blowout preventer to seal the breach will be tried. The blowout preventer was supposed to be a fail-safe solution that should have sealed the well and prevented the April 21 explosion and oil rig fire, but did not. First, BP will try pumping shredded tires and other similar material into the blowout preventer to see if that will seal the leaky well. If that fails, technicians will remove the riser from the top of the blowout preventer and put a second preventer in place to do the job. If that doesn't work, they'll remove the second blowout preventer and try to place a valve over the breach.
The last possible option to seal the oil leak lies with two relief wells. They would be used to pump cement into the current well to create a workable seal. The first well is currently being drilled at more than 5,000 feet below the surface, and BP expects to start drilling the second by Friday.
Because the company estimates that it will be around July 15 before the relief wells will be complete, Hayward was asked at the press conference if BP had any contingency plans in case something like a hurricane or some other unforeseen mishap were to make the relief wells effort unsuccessful.
"The relief wells ultimately will be successful," he said, and he didn't offer any additional options.
Risking a Far Worse Disaster?
Despite his optimism, Bloomberg reports that BP's own company filings indicate that another blowout at one of the relief wells could release as much as 240,000 barrels of oil a day into the Gulf, a disaster that would dwarf anything so far. Currently, officials say about 5,000 barrels a day could be leaking.
To keep that oil from reaching the U.S. coastline, BP is using a number of measures on the surface. It says it has skimmed more than 100,000 barrels of oily mixture off the surface so far, is using large amounts of dispersing chemicals to break up the crude and is lighting controlled fires to contain the oil slick.
"The activity on the surface is going a long way in containing the spill in the far offshore," Hayward said.
So far, BP estimates that it has spent $350 million trying to contain the spill. It has also paid out $3.5 million on 295 claims of damages from the spill, with thousands more claims and lawsuits pending. Before this is all resolved, analysts at Sanford C. Bernstein Ltd. estimate that efforts to cap the leak and clean up the spill could cost BP and its partners $12.5 billion.
Investing Like Warren Buffett
Learn from one of the world's best investors.View Course »