Abandoned Oil Wells Make Gulf of Mexico 'Environmental Minefield'

While the explosion and subsequent sinking of the Deepwater Horizon rig has thrown the spotlight sharply on BP's activities in the Gulf of Mexico, environmental safety in the area has been neglected for decades. (Photograph: Gerald Herbert/AP)

Abandoned Oil Wells Make Gulf of Mexico 'Environmental Minefield'

AP investigation finds BP was responsible for 600 of more than 27,000 abandoned wells in the Gulf of Mexico

The Gulf of Mexico is packed with abandoned oil wells from a host of companies including BP, according to an investigation by Associated Press which describes the area as "an environmental minefield that has been ignored for decades".

While the explosion and subsequent sinking of the Deepwater Horizon rig has thrown the spotlight sharply on BP's activities in the Gulf of Mexico, environmental safety in the area has been neglected for decades.

There are more than 27,000 abandoned wells in the Gulf of Mexico, according to AP, of which 600 belonged to BP. The oldest of the abandoned wells dates back to the late 1940s and the AP investigation highlights concerns about the way in which some of the wells have been plugged, especially the 3,500 neglected wells which are catalogued by the government as "temporarily abandoned". The rules for shutting off temporarily closed wells is not as strict as for completely abandoned wells.

Regulations for temporarily abandoned wells require oil companies to present plans to reuse or permanently plug such wells within a year, but the AP found that the rule is routinely circumvented, and that more than 1,000 wells have lingered in that unfinished condition for more than a decade. About three-quarters of temporarily abandoned wells have been left in that status for more than a year, and many since the 1950s and 1960s.

AP quoted state officials as estimating that tens of thousands are badly sealed, either because they predate strict regulation or because the operating companies violated rules. Texas alone has plugged more than 21,000 abandoned wells to control pollution, according to the state comptroller's office. In state-controlled waters off the coast of California, many abandoned wells have had to be resealed. But in deeper federal waters, AP points out, there is very little investigation into the state of abandoned wells.

The US Minerals Management Service, now called the Bureau of Ocean Energy Management, Regulation and Enforcement and charged with keeping an eye on offshore drilling, has little power to deal with abandoned wells. It merely requests paperwork to prove that a well has been capped and unlike regulators in states such as California, it does not typically inspect the job.

The Deepwater Horizon disaster has so far cost BP more than $3bn (PS1.98bn) in actual clean-up expenses, but many times more in terms of the company's financial value. Its share price has more than halved since the explosion on 20 April and the clean-up is likely to take months if not years. The AP investigation raises the question of whether there are more such environmental disasters waiting to happen.

White knight wanted

BP boss Tony Hayward, meanwhile, continues to try to deal with the fall out from the Deepwater Horizon disaster. The BP chief executive is understood to have met with the Abu Dhabi Investment Authority (ADIA) as he continues his world tour in search of a so-called white knight investor to ward off a takeover by a foreign rival.

Having already held talks with current investor, the Kuwait Investment Office, Hayward has switched his interest to other cash-rich oil states as he tries to bolster support for BP, which has become increasingly vulnerable as a result of the share price collapse caused by the oil spill in the Gulf of Mexico. ADIA is one of the world's largest sovereign wealth funds.

The news comes after it emerged on Tuesday that the US government has demanded that the oil group give it advanced notice of any potential disposals. Earlier this month BP said it would raise $10bn by selling some of its non-core assets in order to help shore up its balance sheet in the face of the mounting cost of dealing with the spill.

On 23 June, the US attorney general Tony West wrote to BP to request that the department of justice be alerted to any sales or even joint ventures entered into by the company. BP has yet to respond.

Speculation has centred on the disposal of some of BP's assets in South America, while 'mature' assets in the North Sea have been seen by other oil watchers as obvious candidates for sale. Hayward was in Azerbaijan on Tuesday to reassure local politicians that it is not about to jettison its assets on the Caspian and met with Azerbaijan president Ilham Aliyev.

BP has ruled out issuing any new shares, instead hoping that it will be able to persuade investors to pick up their stakes in the market. But many in the City believe it will need to raise more cash to bolster its balance sheet, with a bond issue seen as the most likely route.

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