Gulf Oil Spill May Be Exponentially Worse Than Prior Estimates (BP, RIG)

A report on National Public Radio last night has led to demands for the federal government to get tougher with BP plc (NYSE: BP) and Transocean Ltd. (NYSE: RIG) regarding the actual quantity of oil leaking into the Gulf of Mexico from the blown-out Macondo well. The 5,000 b/d estimate was hurriedly produced by NOAA scientists, who may have used an incorrect method to calculate the amount of the spill.  New figures being tossed around are that the spill could be far larger than this original estimate.

BP has demonstrated little interest in trying to measure the amount of oil leaking into the Gulf. Company officials say they are more interested in stopping the leak, no matter its size.

That’s a fine sentiment, but somewhat disingenuous. It is important to know how much oil is leaking so it cancalculate how much damage it is doing to the ocean and how much damage it will do to the shore. A smaller number is to BP’s benefit when it comes time to assess the damage from the spill and figure out how much the company has to pay to clean up the mess.

The New York Times reported that the company had agreed to fly in scientists from the Woods Hole Oceanographic Institute to measure the flow from the well, but that BP later rescinded the invitation.

BP originally estimated the flow at 1,000 b/d, but the NOAA upped the estimate to 5,000 b/d over BP’s objections. BP did say that in its worst-case scenario, 60,000 b/d could be leaking into the Gulf of Mexico.

At the well site in the Gulf, BP and Transocean have halted drilling on the relief well as crews test the blow-out preventer installed at the relief well site. The first relief well has penetrated about 4,000 feet below the sea floor. The drill ship that will drill the second relief well was expected to be on site last night, but no confirmation of that has been given.

Repair crews are also going to try installing a stopper in the 21-inch well pipe that would halt the flow of oil and divert it into a smaller tube that would be connected to a drill ship on the surface. BP has apparently decided to try this before it tries to install the smaller containment dome, called a ‘top hat’, or trying to kill the flow with a ‘junk shot’ of material into the BOP that would plug it up and kill the well.

The NOAA should demand that an accurate measurement of the leak be done as soon as possible. The agency should have done that long ago. The amount of oil flowing into the Gulf is important, not just for assessing damages, but also for making sure that the coming regulations on offshore drilling take into account a correctly sized potential disaster.

Rep. Edward Markey (D-MA) is reportedly sending a letter to BP to demand an accurate count.  It appears that a researcher at Purdue University came up with a figure that about 70,000 barrels of oil per day may be pouring into the Gulf of Mexico after analyzing that video footage of the rate the oil is coming out of the well.

Knowing an exact figure may not be possible because of the depth of the well.

Paul Ausick