“Operations are progressing as planned to place the cap on top of the LMRP”
Admiral Thad Allen told CNN shortly before the cut was confirmed that the next step would be a top hat — that is, a potentially leaky containment, rather than a seal — because the cut with the shears won’t be clean enough for a cap. The Deepwater Horizon Response Center is tweeting that the next step is the LMRP, which will be in place today.
Moody’s has joined Fitch in downgrading BP debt. Moody’s moved BP to AA2 from AA1, and warned of further possible cuts.
BP has published links to all 12 video feeds from the undersea operation.
What does the setback with the diamond saw mean for BP’s efforts to contain the oil flow in the Gulf of Mexico?
The saw was meant to make a clean cut across the top of the riser — a large pipe leading out of the blow-out preventer — that would enable a containment cap to be tightly fitted, capturing the oil and funneling it back up to the surface.
However it got stuck halfway through. The diamond saw has now been freed and BP CNN is reporting that Admiral Thad Allen, incident commander, says BP has ‘abandoned’ use of the diamond saw, and will instead use the giant shears (see image), which successfully severed the lower part of the riser, to make another cut above the blow-out preventer.
The shears are large and not especially precise, as the video below of the shears’ successful earlier cut demonstrates:
The implications of this are big: the shears cannot make as precise a cut as the diamond saw, which would make it more difficult to get a ‘seal’ on the leak and trap all the oil.
So the big question appears to be whether, without the precision of the diamond saw, a clean enough cut can be made to tightly fit the LMRP cap, without letting too much oil leak out. (Check out BP’s technical video to understand what they were trying to do, and a new Oil Drum post which looks at what actually happened).
The setback with the blade may lead to a looser fit and a higher rate of oil leakage between the blowout preventer and cap, Allen said today at a press conference in Houma, Louisiana. BP, based in London, will decide today whether a coarser blade is required, he said.
We should note that BP itself has not ruled out either the diamond saw or sealing it to the LMRP as planned, its GoM response page merely says preparations are under way to cut the riser — without specifying which device, or what comes next. CNN claims that the option of sealing up the cap is off the table, along with the diamond saw, and instead the company is planning to use the ‘top hat’ that it had considered a couple of weeks ago.
If last year’s climate summit in Copenhagen ended in a bang – and not in a good way – the resumption of the talks has gone ahead with barely a whimper.
Negotiators have gathered together in Bonn this week for the first talks since Copenhagen. They will carry on until next Friday, hoping to make progress on some of the key sticking points that ensured the Copenhagen outcome came in for more blame than praise.
Fitch Ratings-London-03 June 2010: Fitch Ratings has today downgraded BP plc’s (BP) Long-term Issuer Default Rating (IDR) and senior unsecured rating to ‘AA’ from ‘AA+’, respectively, and placed the ratings on Rating Watch Negative (RWN). At the same time, Fitch has affirmed BP’s Short-term IDR at ‘F1+’. The ratings of BP Capital Markets plc’s senior unsecured issues, which are fully and unconditionally guaranteed by BP, have been downgraded to ‘AA’ from ‘AA+’ and placed on RWN. BP Capital Markets is BP’s wholly-owned indirect subsidiary.
The downgrade of BP’s ratings reflects Fitch’s opinion that risks to both BP’s business and financial profile continue to increase following the Deepwater Horizon accident in the US Gulf of Mexico. The company has so far repeatedly failed to stop the resultant oil leak and has instead reverted to containment methods that are yet to be fully implemented and are subject to potential weather related disruption. Fitch notes that the drilling of relief wells also poses risks and additional time may be required for them to be fully effective. An additional factor supporting the downgrade is the 1 June 2010 announcement by US Attorney General, Eric Holder, that both a criminal and civil investigation has opened with respect to the oil spill that could have potential negative implications for BP’s financial profile.
Will BP, with its battered share price and reputation, become a genuine takeover target?
While it might be a technically viable, and attractive, target for some companies, there are enough drawbacks to make it difficult to see who might be seriously interested:
Shell and BP in particular have a long history of courtship, which the FT explores. In 1995 Shell approached BP, whose shares were then at a low ebb, but former BP chief executive Lord Browne describes in his memoirs that he stalled until the approach petered out. Then in 2004 it was Browne’s turn to approach Shell, then suffering from its reserves misreporting scandal. But BP’s board was less sure and that too, failed.
As for today, as one banker told the FT: “Shareholders want Mr Hayward focused on fixing this problem. They don’t want to know that he is preoccupied with trying to sort out a deal.”