BP May Have Met Its Match In The Weather

BP plc (NYSE: BP) may be close to capturing all the oil coming from the leak of the Deepwater Horizon rig. It caught 28,000  barrels of the rising crude on Saturday. Most estimates put the amount of the leak at about 50,000 barrels a day. BP may be siphoning off most of that by the middle of July. Relief wells should be in place in August.

BP’s first major victory over the huge disaster may come within a month.BP still has to face billions of dollars in clean-up costs and claims. It is costing the company $100 million a day to cover basic expenses of capping the well and covering early payments to those most affected by the spill. The UK-based company has already spent about $3 billion on these problems.

BP’s $20 billion escrow account should cover a great deal of the damage done by the spill, but will not take care of the huge litigation costs and potentially successful claims against the company from people, companies, and states. But those suits could drag on for years. and there is no guarantee that the plaintiffs will prevail.

BP’s greatest nemesis now may be the weather. That is not just due to the tropical storm Alex, which is moving back into the Western Gulf after its eye spent a day over Mexico. Experts believe that Alex could cause a shutdown of oil recovery and slow the progress of alternative well drilling for two weeks.  Moreover,  the odds that more storms will come this summer and early fall are very high. They do not have to pass directly over the spot where the recovery of crude is taking place . If storms  extending out from a hurricane cause gale-force winds, the ships working on the project of cutting off the flow from the leak will have to withdraw and may return for two weeks, according to the Coast Guard.

Two storms that affect the area around the Deepwater Horizon rig wreck could put the programs to cut the flow of crude behind schedule by a month. BP’s greatest chance to cut its future liability is to cut the amount of the leak, or perhaps eliminate it. Two weeks without work on the well could mean another million barrels of oil make it to the surface and spread across the Gulf, increasing the odds that Florida will be significantly affected by the spill.

The great enemy of BP’s efforts may have little to do with the technical and engineering challenge. The back-braking problem is much more likely to be the weather.

Douglas A. McIntyre