Total moves to calm spill fears

2012-04-10 09:08
Paris - Oil giant Total has moved to reassure investors and environmental activists over the past week that the financial and environmental damage from its gas leak in the North Sea would be limited, a task made more difficult by comparisons to BP's handling of a catastrophic oil spill in the Gulf of Mexico nearly two years ago.

Initial data showed that the leak from Total's platform in the Elgin gas field 250km off the coast of Scotland - which was first detected on March 25 - was pouring out about 200 000m³ of natural gas each day. On Friday, the company said the rate of the leak appeared to have slowed but had no new figure.

In a conference call to analysts and reporters last week, Total Chief Financial Officer Patrick de La Chevardiere appealed to those listening to avoid comparisons between the Elgin leak and the Gulf spill at BP's Macondo well.

"While we understand that comparisons to Macondo are inevitable, we would like to state clearly that the situations are very different," he said. "There is no crude oil involved here and therefore the current impact on and risks for the environment are relatively low."

The Elgin leak is also on a smaller scale, according to George Hirasaki, a chemical engineering professor at Rice University in Texas who has worked in the oil industry.

Environmental damage

"It's more of a very dangerous situation rather than a disaster so they may be able to get it back under control with minimal losses," he said.

Total moved to dispel fears of an explosion or any long-lasting environmental damage, saying that gas is dissipating quickly. A spokesperson for the company said on Thursday that about 1.2m³ of gas condensate remains in the water. He spoke on condition of anonymity, citing policy.

Environmental activist group Greenpeace, however, has sent a boat to the area to take air and water samples. It said its tests would reveal in the coming days whether it considers whether the leak will cause damage to the environment or wildlife in the area.

In the meantime, the group did note that the gas escaping is mostly methane, which is "20 times more dangerous for the climate than CO2 (carbon dioxide)".

During the Gulf spill, roughly 780 million litres of oil spewed from the blown-out well. The spill affected sensitive tidal estuaries and beaches, killed wildlife and closed vast areas of the Gulf to commercial fishing for months.

The disaster cost BP chief executive Tony Hayward his job after a series of public relations gaffes and derailed the company's attempt to create an environmentally friendly image. BP has been hit with several lawsuits, which will likely cost it tens of billions of dollars to resolve.

To pay for the cleanup and claims, BP was forced to cut its dividend, borrow money and sell off tens of billions of dollars in assets. The company's share price is still some 30% below its $10.39 close before the spill on April 20 2010.


Total, however, is so confident that the leak will have minimal environmental impact that de La Chevardiere spent most of a recent call with analysts and journalists discussing the financial consequences. Those, too, he said, are manageable.

Still, it's unclear how quickly Total will be able to stop the leak. It is currently trying to get a team back on the platform to attempt to plug the leak by pumping in mud. On Thursday, a handful of experts landed on the platform for a few hours to gather data on the leak and figure out if it was safe to begin trying to plug it.

Total is also preparing to drill relief wells, in case that first method doesn't work.

Drilling relief wells is an expensive and a fairly long process. When asked whether an estimate of six months was reasonable on the analyst call, Michel Hourcard, the director of development for Total's exploration and production arm, said it was.

Currently, the cost of the response is around $1m per day, said de La Chevardiere. If relief wells are needed, the costs will rise to $1.5m per day, while they're being drilled.

Added to those costs is the loss of production. The current impact on the company's net operating income is about $1.5m per day, he said. That's a small fraction of the $16bn in net operating income the company reported in 2011, and ratings agencies have indicated they are not concerned.

It's also nowhere near the around $40bn BP has estimated the 85-day Gulf spill cost them, including response and compensation. Those costs are in flux because not all litigation has been resolved.
Read more on:    total  |  environment

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