Well Capped, New Moratorium Issued

Jim Brown
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BP may have successfully capped the leaking Macondo well and done so ahead of schedule but assembling a hardware configuration that allowed them to halt the leak at the blow out preventer. BP has not made an announcement yet but anyone monitoring the cameras from the 12 robotic subs was able to watch the event transpire around 7:PM tonight.

BP appear to have successfully halted the leak and will not need to use the complicated flotilla of vessels on the surface to capture the oil. We will not know for sure if they can keep the lid on it until they run some pressure tests over the next 48 hours. If the pressure remains high, currently around 2,300 PSI, then the well bore will appear to be intact. If the pressure begins to drop they have other problems such as leaks in the casing and they will have to continue collecting the oil at the surface to keep the pressure low in the well bore until they can seal it permanently with the relief well.

The new "stack" of components they set on top of the blow out preventer included dial and pressure monitoring packages as well as what appears to be another set of blow out preventer valves designed to close the pipe if something goes wrong higher up. You can?t blame BP for being gun shy after their problems with the original BOP.

The fleet of 12 robotic vehicles was definitely busy over the last 48 hours. They looked like a swarm of giant bees buzzing around on the ocean floor each with their assigned tasks. I am amazed by the complexity of the tasks they are able to complete through the power of hydraulics including removing and replacing bolts the size of you forearm.

BP rallied $2.71 today or roughly +8% on the success they achieved over the weekend in removing the section of broken riser and the old flange from the top of the BOP. There was also news that BP was in talks with Apache to sell their Prudhoe Bay assets for $12 billion to raise cash for the spill costs.

On the government front the Interior Department issued a new six-month moratorium for drilling in the gulf. The new ban will expire November 30th or earlier if the Presidential Commission completes their work earlier. The new ban could affect drilling in all depths including shallow water because it is based on the type of safety equipment in use instead of water depth. The new ban applies to drilling operations that use subsea blowout preventers or surface BOPs on floating facilities.

Offshore platforms currently producing oil would be allowed to continue production. The new ban is expected to reduce 2011 oil production from the gulf by 25 million barrels or more depending on how many rigs are moved away from the gulf to work outside the USA. Moving a rig is normally a multiyear commitment by that company. They are not going to rush right back once the ban is canceled. When you pay more for gasoline over the next couple years be sure to thank the administration.

Jim Brown

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