The Weekly Wrap: July 23, 2010

Tropical storm Bonnie leads to suspension of containment, clean-up efforts. The movement of Tropical Storm Bonnie into the Gulf of Mexico on Friday has prompted BP to suspend its effort to permanently plug the Macondo well and begin to evacuate personnel from the area. With the relief-well rigs disconnected, the effort to kill the leaking well is delayed by two weeks. Concerns are also mounting over whether Bonnie will spread the oil slick further inland into Louisiana’s extensive wetlands.

Malfunctioning alarm system causes more trouble for Transocean. Michael Williams, the chief electrician aboard the Deepwater Horizon rig, revealed in a testimony on Thursday that the rig’s alarm system had been partially disabled prior to the gas explosion that sank the rig in April. The alarm was meant to detect and warn workers of sudden increases in natural gas levels and prevent gas from entering the rig’s engine rooms. The allegations threaten to increase liabilities for rig operator Transocean, which so far has managed to dodge most of the public outrage that has settled on BP.

Oil majors eying Iraq’s oil fields. The Iraqi oil ministry hosted a two-day symposium for executives of the major oil companies this week, where the majors announced their continuing effort to add 10 million barrels to Iraq’s daily oil production by 2017. But reaching that goal will require much greater cooperation between the companies to repair and boost performance with Iraq’s weakened oil infrastructure. A multi-company committee is preparing a report on how to accomplish those goals, due in mid-September. Meanwhile, Iraq continues to attract foreign investment in its oilfields, with Russia’s Lukoil announcing a major investment in the southern part of the country.

India still hunting for oil and gas abroad. India’s state-owned Oil and Natural Gas Corp. expressed interest this week in acquiring BP’s stake in a major gas field in the South China Sea. The potential deal, which could be worth $966 million, would put BP further along towards its fundraising goal of $10 billion for the Gulf oil spill clean-up, while allowing India to chalk up its latest gain in its increased drive for energy security. The news followed reports that Indian energy giant Reliance Industries was in talks to play a major role in a shale gas project in British Columbia.

Moratorium? What moratorium? Despite the U.S. suspension of deepwater drilling, other countries are moving ahead to add or expand deepwater projects, from Norway to Brazil. The moratorium has seen rig operators withdraw their deepwater rigs from the Gulf of Mexico, deploying them to West Africa and Egypt. Although Canada and Norway have launched policy reviews of deepwater drilling practices, neither shows any signs of curbing production. The limited affect of the moratorium overseas reflects the lure of continued high market prices for oil and the size of the new deepwater fields, some of which are six times as big as the average fields in the Gulf.

Industry cooperation on oil-capture system leaves BP odd major out. BP was conspicuously absent from the group of majors that announced a plan this week to come up with a new system to handle future deepwater oil spills in the Gulf of Mexico. Exxon Mobil, Royal Dutch Shell, ConocoPhillips, and Chevron pledged a total of $1 billion to design, build, and manage the oil-capture system through a new nonprofit organization. BP is expected to join the consortium in the future, but the company has faced mounting criticism from other players in the industry. The latest charge came from Shell’s upstream division, which highlighted deficiencies in BP’s offshore drilling procedures.