UPDATE: BP Starts Work On New Gulf Oil Spill-Containment Cap

BP PLC's (BP, BP.LN) effort to contain the oil gushing from the mile-deep leak in the Gulf of Mexico entered a new stage Saturday, with undersea robots starting work to install a new, tight-fitting containment cap on the broken, mile-deep well.

The effort comes more than 12 weeks after Transocean Ltd.'s (RIG) Deepwater Horizon burned and sank, unleashing the spill that's fouled the coasts of at least four states and killed untold numbers of sea creatures and birds. For the past several weeks, a more loosely fitting cap and companion system have managed to keep up to about 25,000 barrels of oil a day out of the Gulf. The new sealing cap-system, expected online within a week, plus additional measures, will allow the recovery of 60,000-80,000 barrels a day in two to three weeks, a BP official said Saturday. Scientists have estimated that between 35,000 and 60,000 barrels of oil have flowed into the Gulf from the broken well each day.

"Over the next four to seven days, depending on how things go, we should get that sealing cap on," BP Senior Vice President Kent Wells said in a teleconference briefing Saturday. Over the next two to three weeks, "as we start to ramp up the additional containment capacity, we should see less and less flow.... The intent is to have the ability to contain all of the flow."

Before the new cap can be put in place, engineers had to remove the loosely fitting cap that had been collecting up to 15,000 barrels a day. BP spokesman Mark Proegler confirmed that undersea robots successfully removed the cap at about 12:37 p.m. CDT Saturday. This means oil is flowing unimpeded from the well head, though some crude continues to be siphoned via a separate system to be burned off from a ship on the surface. BP simultaneously is working to bring online a third containment vessel, the Helix Producer. Wells said BP should start ramping up oil collection with the vessel on Sunday, with full capacity reached in about three days.

Wells added that additional oil-skimming vessels had been moved into place near the well site while the well head is uncapped. "We feel we're in a good position to collect the oil very close to the source, which is always important."

BP, with the approval of the federal government, went ahead with work to replace the containment cap--even though the Helix Producer isn't online yet--to take advantage of a week's worth of expected calm weather. A pair of tropical storms delayed the installation of the Helix Producer gear over the past couple of weeks.

"I validated this plan because the capacity for oil containment when these installations are complete will be far greater than the capabilities we have achieved using current systems," said the federal government's point man on the recovery effort, Ret. Coast Guard Adm. Thad Allen, in a press release late Friday.

Although forecasts call for favorable weather over the next several days, the Gulf region is expected to face a very active hurricane season. BP noted that such a sealing cap has never been used at such depths and warned "there can be no assurance" that it's going to be successfully installed within the hoped-for time frame. In case something does go wrong with the installation, Wells said "we always have backups for our backups," such as another containment device that's already on site and ready for installation.

While the recovery system with the new cap, if all goes as planned, could be able to contain all of the oil flowing from the broken Macondo well, BP and the government have always placed more faith in the ability of a relief well to finally plug and kill the leak. BP and the federal government are officially sticking by their forecast for a mid-August completion of the first of two relief wells.

The Wall Street Journal reported last week, however, that BP is pressing to plug the runaway Macondo well by late July, and a contractor helping BP with the relief-well process said work was progressing ahead of schedule.

-By Mark Long, Dow Jones Newswires; 212-416-2145; mark.long@dowjones.com

(Angel Gonzalez contributed to this report.)

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