Spill oil to seep into supply chain as BP sells it

[June 12, 2010]  NEW ORLEANS (AP) -- Oil from nation's worst spill could soon end up at gas stations, construction sites and even grocery stores once BP sells the crude taken from a ruptured well in the Gulf of Mexico to raise money for wildlife protection.

Energy giant BP PLC announced this week it will donate its share of the proceeds generated by selling the oil captured from the well to fund efforts to protect and restore wildlife habitat along the Gulf Coast.

The company has not released specifics on how the fund will work and said it doesn't know how much money might be raised -- but once the oil is brought to shore, it will creep into the world's economic supply chain unnoticed by consumers.

"Oil is oil," said Julius Langlinais, professor emeritus of petroleum engineering at Louisiana State University. "There's no stamp or anything on it. It's all the same molecules."

Scientists have estimated that anywhere between about 40 million gallons to 109 million gallons of oil have gushed into the Gulf since a drilling rig exploded April 20, killing 11 workers and triggering the worst oil spill in U.S. history.

Coast Guard Adm. Thad Allen, the Obama administration's point man for the oil spill, said that since the leak began, 4 million gallons of crude have been siphoned off the leaking well using tubes and caps. An additional 18 million gallons have been skimmed from the ocean surface, he said. The skimmed liquid is generally only 10 to 15 percent oil.

Negotiations were still ongoing Friday to find a buyer for all that captured oil, BP spokesman Mark Proegler said.

"There's nothing special about it, other than everyone's looking at it," he said.

It's possible the oil won't even be sold to a refinery directly by BP or even processed in the Gulf. Big oil companies have trading departments that commonly swap barrels of crude with other firms or sell them to traders who could route the oil across the globe, Langlinais said.

Once that crude hits a refinery, the oil could end up in a wide array of fuels and products including gasoline, diesel, heating oil, asphalt and plastic -- including the bags used at grocery stores, the cases for cell phone and microwaves. It also can be used as raw feed for chemical companies.

"I think it's an eye-opening experience for people who don't give it much thought when they finally realize how much their lives depend on oil," Langlinais said.

BP has said it plans to boost its ability to directly capture oil gushing from the well by early next week. A semi-submersible drilling rig would capture and burn up to 420,000 gallons of oil daily. Once on board, the oil and gas collected from the well will be sent down a boom and burned at sea.

A drill ship already at the scene can process a maximum of 756,000 gallons of oil daily that's sucked up through a containment cap sitting on the well head.

Federal officials are still reviewing BP's plan to build a new containment system designed to capture more oil and be more durable during hurricane season. Allen said the plan could be revised based on calculations of how much oil is spilling from the well.

It's unclear how much the captured oil will be worth once it's sold. Oil was trading around $74 a barrel Friday, but BP officials said they expect to get a lower price than normal because the oil captured from the leak is laced with methanol.

BP is injecting methanol as an antifreeze into the inside of the containment cap sitting over the gushing well to prevent the buildup of an ice-like slush that can clog the pipes.

Under its operating agreement, BP gets 65 percent of the net revenue made by selling oil from the leak site. After deducting for royalty payments owed to the government, it will donate its share of the proceeds to the wildlife fund. Anadarko Petroleum Corp., which is entitled to 25 percent of the oil revenue, is still discussing what do with its share of the money when the oil is sold, Anadarko spokesman Matt Carmichael said.

"We're committed to doing the right thing," he said.

A subsidiary of Mitsui & Co. Ltd., which has a 10 percent stake, declined to comment.

[Associated Press; By RAY HENRY]

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