BP Plc made an initial payment of $3 billion into the trust fund it established to pay damages from its Gulf of Mexico oil spill, as it moved closer to permanently plugging the well.
The company and the U.S. Justice Department reported the payment to the trust today, the first for what will eventually be a $20 billion fund. BP, based in London, agreed to establish the trust in June after meeting with President Barack Obama.
BP successfully sealed the well’s casing with cement last week, leaving to a relief well the job of filling the remaining area of the well with cement and assuring no more leaks, National Incident Commander Thad Allen said during a conference call with reporters today.
The relief well is 17,909 feet (5,459 meters) below sea level and poised to intercept the damaged well in the Gulf of Mexico “towards the end of the week,” Allen said. Intercepting it and sealing it from the bottom will “permanently kill the well.”
The final stretch of the relief well will take several days as drillers withdraw the bit and insert a magnetic sensor to determine the distance to the damaged well, Allen said. The next segment to be drilled will reach down another 30 feet, BP said today in a statement on its website.
The cost of the spill rose to $6.1 billion, excluding the escrow-fund deposit, BP said. The well spewed an estimated 4.9 million barrels of crude after an April 20 explosion aboard the Deepwater Horizon drilling rig that killed 11 workers. BP capped the leak with a stack of valves on July 15 and then injected cement into the top of the well.
About 74 percent of the oil that flowed from Macondo evaporated, dissolved or biodegraded, or was burned, skimmed or captured, the government said in an Aug. 4 report.
At the height of the crisis in June, scientists predicted a worst-case scenario where Macondo could gush until the end of year, sending costs toward $100 billion and jeopardizing the future of offshore drilling.
“It wasn’t as catastrophic as it might have been, and that bodes well for all the negative sentiment in this hazardous industry,” said Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh, who rates BP a buy.
BP rose 7.4 pence, or 1.7 percent, to 432.75 pence at 4:35 p.m. in London. The shares are down 34 percent since the April explosion.
Citigroup Inc. will be the corporate trustee and paying agent for the fund, BP said. John S. Martin, a former federal judge, and Kent Syverud, dean of the Washington University School of Law in St. Louis, were appointed individual trustees.
“Establishing this trust and making the initial deposit ahead of schedule further demonstrates our commitment to making it right in the Gulf Coast,” Bob Dudley, chief executive officer of BP’s Gulf Coast Restoration Organization, said in a statement. BP said last month Dudley will take over as CEO of the company on Oct. 1, replacing Tony Hayward.
BP said it will deposit another $2 billion into the fund by the end of the year and $1.25 billion each quarter until it reaches $20 billion.
Kenneth Feinberg is the administrator of the fund. Feinberg also serves as special master in executive compensation for the Obama administration, and oversaw a claims fund for victims of the Sept. 11, 2001, terrorist attacks.