BP's woes in the Gulf of Mexico grow starkly worse as the group admitted that its latest efforts to staunch the oil flow from the stricken Macondo well had failed. That sent the shares plunging 15 per cent and the embattled oil group has now lost more than a third of its value since a fire sank the Deepwater Horizon rig in mid-April, sparking the so-far-unpluggable leak.
With the failure of its "top kill" and "junk shot" strategies, BP is next going to try a "lower marine riser package", which will seek to fit a containment cap over the well to capture and syphon oil to the surface, albeit at the cost of a higher short-term leak rate. However, achieving this remotely in 1,500m (5,000ft) of water will be challenging in the extreme, particularly given the impending hurricane season. The only workable long-term solution looks like being the relief wells that BP started drilling in early May, although these will take until August to complete.
The slick has already engulfed the wider oil and gas industry. US President Barack Obama's response to the crisis has included extending to six months a moratorium on exploratory deepwater drilling in the Gulf of Mexico. Drilling off the coasts of Virginia and Alaska will also be suspended, which threatens to derail Royal Dutch Shell's plans to explore the oil-rich Chukchi Sea blocks it paid $2.1bn (£1.4bn) to secure in 2008.
The gravity of the crisis is now also raising concerns over not just BP's ability to maintain near-term dividends but its ability to survive as an independent company. BP said its costs to date amounted to $990m, although Richard Nolan, oil and gas analyst at broker Daniel Stewart, points out that this hasn't achieved any progress since the rig sank six weeks ago.
But Mr Nolan's main concerns are the open-ended litigation costs and liabilities that even BP admits are "too early to quantify". Indeed, when the oil has stopped flowing and all the claims and counter-claims have been settled, Mr Nolan says he "would not be surprised if BP ceases to exist in its current form".
