WRAPUP 7-BP suffers snag in US Gulf oil containment effort

* Box moved off to side due to hydrate buildup

* Tar balls washing ashore in Alabama

* Survivor interviews paint picture of blast

* Winds pick up, no burns of oil planned on Gulf
(Adds quotes from tar ball sighting, details)

By Erwin Seba

ROBERT, La., May 8 (BestGrowthStock) – BP Plc (BP.L: ) suffered a
setback on Saturday in an attempt to contain oil gushing into
the Gulf of Mexico with a huge metal dome when crystallized gas
filled the structure, a blow to hopes of a quick, temporary
solution to a growing environmental disaster.

Word of the snag came as balls of tar washed ashore along a
popular Alabama island beach in what may be the first evidence
of spilled oil washing into a populated area.

BP engineers have moved the four-story containment dome —
which was seen as the best short-term way to stem the flow from
a ruptured oil well — off to the side on the sea floor and
will take two days trying to come up with a solution, Doug
Suttles, chief operating officer, told reporters.

The problem is gas hydrates, essentially slushy methane gas
that would block the oil from being siphoned out the top of the
box. As BP tries to solve it, oil keeps flowing unchecked into
the Gulf in what could be the worst U.S. oil spill.

“I wouldn’t say it’s failed yet. What I would say is what
we attempted to do last night didn’t work because these
hydrates plugged up the top of the dome,” Suttles said.

“What we’re currently doing, and I suspect it will probably
take the next 48 hours or so, is saying, ‘Is there a way to
overcome this problem?'”

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INSIDER TV: http://link.reuters.com/gen92k

Graphic: http://link.reuters.com/xeh23k

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The company, under pressure from the Obama administration
to limit the damage to the Gulf and coastlines of four states,
expected hydrates, but not the volumes encountered after a crew
lowered the dome nearly a mile (1.6 km) to the sea floor.

Possible solutions may involve heating the area or adding
methanol to break up the hydrates, Suttles said.

Officials had already warned there was no guarantee the
technology would work at such water depth. It hopes to attach a
pipe to the 98-tonne dome to pump oil to a tanker, with the aim
of capturing about 85 percent of the leaking crude.

The spill threatens an economic and ecological disaster
targeting beaches, wildlife refuges and fishing in Louisiana,
Mississippi, Alabama and Florida. It has forced President
Barack Obama to rethink plans to open more waters to drilling.

On Dauphin Island, Alabama, a barrier island and resort
full of weekend swimmers and beachcombers, sunbathers found tar
balls and tar beads washing up on Saturday along a half-mile
stretch of the white-sand beach and alerted media outlets and
authorities.

A team of dozens of BP-contracted workers in rubber boots
and gloves was dispatched to the scene to lay down special
clusters of oil-absorbing synthetic fibers called pom-poms,
erect storm fencing along the beach and collect samples of the
tar and water for testing. The beach remained open.

The tar will be analyzed to determine if it came from the
oil slick in the Gulf, officials said.

“We cannot confirm that it’s from the oil spill, but we
certainly assume that to be the case. We won’t know for certain
until some tests are completed,” Dauphin Island Mayor Jeff
Collier said.

A spokesman for the spill response Unified Command in
Mobile said tar washing ashore was a “common occurrence” along
Alabama beaches, but some local residents disagreed.

“I have never seen this and I am here once a week every
summer. This is the first time I have seen anything like this,”
said Molly Hunter, 34, of Mobile, holding up a chunk of tar
about the size of an open hand.

The only previous confirmed contact of oil from the spill
with shoreline has been in the uninhabited Chandeleur Islands
off Louisiana, mostly a wildlife reserve.

RELIEF WELL

Suttles said BP may now try to plug up the damaged blowout
preventor on the well or attach a new one on top of it.

It also is drilling a relief well to halt the leak — which
began after the Deepwater Horizon rig exploded on April 20,
killing 11 crew members — but it could take three months.

In the initial blast, a natural gas cloud enveloped the rig
and exploded just as visiting BP officials were celebrating
seven accident-free years in the rig’s crew quarters, according
to accounts by survivors of the blast. [ID:nN08178062]

According to transcripts of interviews obtained by Robert
Bea, a University of California Berkeley engineering professor,
a giant methane bubble rushed up the drill pipe and filled the
air above the deck of the drilling platform with flammable gas,
followed by a scalding flood of crude that spilled onto the
drill deck and ignited.

After several days of calm weather, winds began to pick up
on Saturday, preventing controlled burns of the thickest
concentrations of oil. Crews conducted five burns on Friday.

Nearly 200 boats deployed protective booms and used
dispersants to break up the thick oil on Saturday. Crews have
laid almost 900,000 feet (270,000 metres) of boom, and spread
267,000 gallons (1 million litres) of chemical dispersant.

In Bayou La Batre, the heart of Alabama’s seafood industry,
the docks were largely quiet as thousands of shrimpers and
seafood processors remained idled by fishing restrictions.

About 30 oyster-processing plants have run out of product
and shut down, putting as many as 900 people out of work, said
Wayne Eldridge, owner of J&W Marine Enterprises and an oyster
plant operator himself.

“I’m screwed,” Eldridge said. “The biggest thing is I’ve
got 35 people unemployed there.”

LIABILITY

BP Chief Executive Tony Hayward said a $75 million legal
cap on the liabilities for economic damages under federal law,
which some U.S. lawmakers now want to raise, would not be a
limit and renewed promises to meet all “legitimate” claims.

BP suffered another blow on Friday when ratings agency
Standard & Poor’s lowered its outlook to negative from stable
and indicated a ratings downgrade was likely. [ID:nN07219028]

S&P also cut its outlook for Anadarko Petroleum Corp
(APC.N: ), which has a 25 percent stake in the ill-fated well, to
stable from positive, saying it was “potentially liable for
significant costs and liabilities relating to the clean-up.”

Oil has been gushing into the Gulf at a rate estimated at a
minimum of 5,000 barrels (210,000 gallons/795,000 litres) a day
since the well ruptured. Ian MacDonald, biological
oceanographer at Florida State University, told Reuters this
figure was too conservative, putting his guess as high as
25,000 barrels (1.05 million gallons/4 million litres) a day.
[ID:nN07228278]

In New Orleans, about 200 people holding banners saying:
“Clean It Up” protested on Saturday against BP, the spill and
its environmental consequences.

The rally, organized by the environmental group Sierra
Club, is one of a series of demonstrations due to take place
across the country in the next 10 days, organizers said.

Stock Market News

(Additional reporting by Matt Bigg in New Orleans; Chris
Baltimore in Houston; Tom Brown and Pascal Fletcher in Miami;
Steve Gorman in Dauphin Island, Alabama; Writing by Jeffrey
Jones and John Whitesides; Editing by Peter Cooney)

WRAPUP 7-BP suffers snag in US Gulf oil containment effort