] Oilgram News/OPR Extra A special edition from the editors of Platts May 10, 2010

As it has during other crises affecting oil and other energy markets, such as hurricanes Katrina, Rita and Ivan, Platts is produc- ing this special summary of events surrounding the rig disaster in the Gulf of Mexico. This special joint edi- tion of Platts Oilgram News and OPR Extra will be published as frequently as Platts believes necessary to give its readers a quick summary of developments surrounding the leak at the wellhead, the growing footprint of the spill, and the impact these occurrences are having on markets and on US federal energy policy. BP plans its next moves

„ Undaunted by failure of its large 100-ton going from one extreme to the other,” said acknowledged the difficulties of undersea containment dome, BP came out swinging on Wells, comparing the size of the two domes. drilling and said a second rig is en route to multiple fronts May 10 with plans for a mini- The smaller top hat will be connected to the begin drilling another relief well. , dome dubbed a “top hat” and use of “junk drillship prior to deployment and will use a which was involved in operating the Deepwa- shots” in its continuing battle to stem the methanol pumping system to adjust the ter Horizon, is operating both relief-well rigs. 5,000 b/d crude oil from its runaway Macon- water temperature around its shell. While do exploration well in the Gulf of Mexico. BP BP had expected the larger dome to divert „ BP increased its estimate of daily costs for CEO , following failure of the as much as 85% of the Macondo crude flow, the recovery operation to $10 million, up from large containment dome over the weekend, Wells declined to speculate on the projected a previous projection of $6 million, and said a similar attempt will take place with efficiency of the top hat. By using a smaller placed total cost so far at $350 million. In the much smaller barrel-like “top hat” struc- dome, he said BP now will be able to pro- addition, BP is spending another $100 million ture measuring a mere four feet in diameter ceed with the junk shots as a more defini- to drill one relief well as the ultimate solution by five feet in height. BP should deploy the tive means for plugging the faulty BOP as a to the Macondo spill, and Hayward said BP top hat by the end of the week, but the com- first step toward abandoning the well and will spud a second, backup relief well soon to pany also will continue preparing for a anoth- sealing it with cement. In that regard, last make sure that solution succeeds. er strategy known as a junk shot using golf week’s retrieval of the BOP’s control pod or balls, rubber tire chunks and other debris to “brain” emerges as a key for success with Transocean gets ready to defend itself plug the well’s malfunctioning blowout pre- the impending junk shots, Wells said. „ Transocean’s CEO Steven Newman plans venter by injection into its “choke and kill” to tell US lawmakers May 11 that the “root lines within the next two weeks. At the same „ BP has another rig heading to the Macon- cause” of the disaster was a “sudden, cata- time, Hayward said the company wants to do oil prospect leak to drill a second relief strophic failure of the cement” on the well continue using subsea dispersants at the well as a backup to the ongoing effort to cap some 5,000 feet below the surface of wellhead to minimize the flow of oil to the drill an initial relief well, a company execu- the water. Newman is slated to appear surface while using booms and dispersants tive told reporters in Washington Monday. before two US Senate committees on May on the surface to contain the spill above. In “The ultimate solution, and the equivalent of 11. In prepared remarks provided by one of a later press conference, US Coast Guard putting a tourniquet on this problem, is to the panels, Newman says problems with the Rear Admiral Mary Landry said the Coast drill a relief well, and we are actually going sub-surface cement work was the main thing Guard would need 24 hours to run further to drill two,” David Nagel, executive vice that caused the Deepwater Horizon semi- tests on the subsea dispersants before president of BP America, told reporters a submersible drilling rig to explode and sub- approving their renewed deployment after day before senior BP executives are to testi- sequently sink. “The one thing we know with two tests last week. fy in Congress about the spill. He addressed certainty is that on the evening of April 20, reporters at the offices of a public relations there was a sudden, catastrophic failure of „ Elaborating on the top hat and junk shot firm. The first relief well was begun on May the cement, the casing, or both,” Newman technologies, BP’s senior vice president for 5, and is already 4,000 feet under the sea says in remarks released by the Senate E&P, Kent Wells, followed Hayward at the bed, toward its target of 13,000 feet. It Energy and Natural Resources Committee. May 10 press conference and said the new aims to intersect the existing well at that “Therein lies the root cause of this occur- dome’s much smaller size should limit the depth, drill through the casing, and plug the rence; without a disastrous failure of one of amount of freezing sea water trapped inside well to stop oil and gas from escaping. BP those elements, the explosion could not and reduce crystallization of the hydrates in has estimated finishing the relief well will have occurred.” Newman seems to stress in natural gas seeping from the well. “We are take a total of about 90 days. Nagel his testimony that Transocean was not to

Oilgram News / OPR Extra

]Director of News: John Kingston This special edition of Platts Oilgram News and Platts OPR Extra is published by Platts, a division of The McGraw Hill Companies. Registered office: Two Penn Plaza, 25th Floor, New York, NY 10121-2298. Officers of the Corporation: Harold McGraw III, Chairman, President and Chief Executive Officer; Kenneth Vittor, Executive Vice President and General Counsel; Robert J. Bahash, Executive Vice President and Chief Financial Officer; John Weisenseel, Senior Vice President, Treasurer. Copyright © 2010 by Platts, The McGraw-Hill Companies, Inc. Platts is a trademark of The McGraw-Hill Companies, Inc.

The McGraw-Hill Companies SPECIAL EDITION HOME blame for the disaster, emphasizing that the dance with the requirements of the well said. In a note to investors issued earlier, explosion occurred three days after the owner’s well construction plan,” Probert says S&P said “the seemingly out-of-control oil well process to construct BP’s Macondo explo- in his prepared remarks. leak in the Gulf of Mexico was a contributing ration well was completed. bullish factor in the petroleum market by Inspections continuing month-end.” „ Tim Probert, ’s president of glob- „ Inspections of 30 deepwater drilling rigs al business lines as well as the company’s over the past week have found a few minor Background chief health, safety and environmental officer, safety violations, but nothing serious, Lars An explosion ripped through the Deepwater is also slated to testify at the two Senate Herbst, director of the Minerals Management Horizon drilling rig in the Gulf of Mexico on hearings on May 11. According to a copy of Service’s Gulf Region confirmed Saturday. April 20, killing 11 of the 126-person crew. A his prepared remarks, Probert acknowledges Inspections of platforms is under way. fire raged for about 36 hours before a second Halliburton completed the cementing of the blast sank the rig on April 22. The well’s ninth and final production casing string just „ The BP oil leak led to some bullishness in blowout preventer failed to activate, resulting 20 hours before the explosion tore through the Standard & Poor’s GSCI, though its effect in an oil leak that officials currently estimate the Deepwater Horizon. But Probert said Hal- has since been overshadowed by concerns is occurring at a rate of about 5,000 b/d. The liburton completed the job by the book, and about Europe’s fiscal woes and stock market rig was working BP’s in that the drilling contractor tested the work jitters, Standard & Poor’s, owner of the GSCI, 4,993 feet of water, about 40 miles offshore and signed off on it. “Halliburton is confident said Monday. “Initially there was a fear factor Venice, Louisiana. BP operates the well and that the cementing work on the Mississippi (from the leak),” Mike McGlone, director of own a 65% stake; partners include Anadarko Canyon 252 well was completed in accor- fixed income and commodity indexing at S&P, (25%) and Japan’s Mitsui (10%).

2 MAY 10, 2010