A natural gas leak discovered last Sunday at the Elgin field in the North Sea could cost France’s Total SA (NYSE: TOT) billions of dollars in costs to plug the well and clean up the mess it will leave behind. In a worst case scenario, the platform could explode which could cost Total as much as $3.3 billion. Even though that’s far less than the cost to BP plc (NYSE: BP) for the April 2010 explosion at its Gulf of Mexico Macondo well, that won’t be the full cost of Total’s current problem.
Royal Dutch Shell plc (NYSE: RDS-A) shut-in and evacuated nearby operations earlier this week, and the company will surely seek some compensation.
In addition to the gas leak, some amount of liquid condensate is also escaping, and has covered several square miles of the sea with a sheen that may have to be cleaned up once it is safe to return to the area.
Total may also be forced to drill a relief well, which would add about $58 million to the cost according to a report in The Wall Street Journal. Drilling a relief well could take up to seven months and cost the company $200 million.
The company only says that its costs are currently running at $1.5 million per day. Total’s shares are down -2.3% today at $49.96 in a 52-week range of $40.00-$64.44. Since Monday, shares are down about -9%.
Paul Ausick
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