BP stocks fall on clean-up costs

But such confidence was not evident in the market.

“It seems that shares are under pressure from the fear of whether BP can survive … Now it’s about the survivability of the company,” said Jon Najarian, a founder of web information site optionmonster.com in Chicago.

‘BP should pay’

Barack Obama’s administration has toughened its rhetoric as polls show public disapproval over its handling of the worst oil spill in US history.

Ken Salazar, the US interior secretary, told a senate hearing on Wednesday that he would ask BP to repay the salaries of workers laid off because of a six-month moratorium on deepwater exploratory drilling imposed by the US government in the wake of the BP spill.

in depth

The White House echoed Salazar’s comments, with spokesman Robert Gibbs telling reporters that “the moratorium is as a result of the accident that BP caused. It is an economic loss for those workers, and … those are claims that BP should pay”.

And turning up the heat on the beleaguered company, a senior US justice department official said after the markets closed that the department was “planning to take action” to ensure BP had enough money on hand to cover damages from the spill.

BP’s total bill so far, including cleanup costs, has reached $1.25bn and the US government has already said it will have to pay billions more in penalties.

The company has said it will pay for the clean-up and direct damages to those affected by the spill, but the moratorium was a government decision and costs related to it were a different matter, a BP source said, adding that the company believes it may be heading for a showdown with the White House over widening liability demands.

Contingency planning

In another sign of the government stepping up the pressure on BP, the oil company was given a 72-hour deadline from Tuesday to produce improved plans on containing the giant spill.

Rear-Admiral James Watson, an on-scene co-ordinator for the US Coast Guard, has ordered the company to produce contingency planning for its “top hat” containment system and explain how it intends to recover the remaining crude and natural gas still leaking.

The current procedure, which began on Saturday, involves a cap placed over the leak that gathers the oil, allowing it to be siphoned up via a pipe to a container ship.

Tuesday’s letter, which was addressed to Doug Suttles, BP’s chief operating officer, highlighted concerns about the capacity of the ship processing the oil and fears that operations could be derailed during the ongoing hurricane season.

“The system[s] established must have appropriate redundancies to maintain complete collection rates in the event that operational problems are encountered in any part of the system,” it said.

“For example, if multiple oil recovery vessels are employed for collection/recovery efforts, redundancies must ensure that the failure of a vessel[s] does not reduce the capacity of the system for continuous recovery of oil.

“Further, plans and processes must be put into place to ensure that, in the event that a hurricane or other severe weather causes recovery vessels to go off station, those vessels [or alternate vessels] can be brought back on station as quickly as possible after the storm passes and that collection efforts can resume without delay,” it said.

Coastline fouled

By the most conservative estimate, 26 million litres of crude have spilled into the Gulf – though US officials say the actual tally could be much higher – fouling the US coastline, coating birds and other wildlife, and severely affecting the fishing industry.

With Wednesday’s share price drop in New York, BP has given up more than half its market value since the crisis began when its offshore drilling rig exploded on April 20, killing 11 workers.

And the cost of protecting BP’s debt against default hit new highs on Wednesday.

“The confidence in BP being able to stop the oil leak and deal with the ecological aftermath has disappeared,” said Joe Kinahan, chief derivatives strategist at TD Ameritrade.