Obama, BP set for for oil-spill showdown

6/14/2010

WASHINGTON/LONDON — U.S. President Barack Obama embarked on a new visit to the Gulf of Mexico Monday, two days ahead of a crucial showdown with top BP executives over the worst environmental disaster in U.S. history.

The oil giant's ever-growing cleanup bill from the oil spill piled more pressure on its shares Monday which were down almost 9 percent in early afternoon trading in London.

In what is expected to be a pivotal week in the 56-day-old spill, lawmakers are due to grill BP executives at hearings on Tuesday and Thursday, while the president makes a two-day visit to the Gulf coast and address the nation.

Obama has seen the massive spill hijack his ambitious political agenda, pushing job creation and Wall Street reform to the backburner. Both are key issues in November congressional elections in which Obama's fellow Democrats are expected to face a tough fight to hold on to their majorities.

Facing intense criticism that he has not shown enough personal leadership in the spill, Obama will seek to use his meeting with BP executives Wednesday and his Oval office speech to show that he is on top of the crisis.

For its part, BP hopes to stop the slide in the company's share price, which has sunk under a barrage of criticism from the Obama administration over its handling of the cleanup of the spill and threats that it may face greater liabilities.

The company has lost over 40 percent of its market value since the crisis began. BP's U.S.-listed shares fell almost 7 percent in early trading in New York.

Millions of gallons of oil have gushed into the Gulf since an April 20 explosion on an offshore rig killed 11 workers and ruptured a deep-sea well. The spill has soiled some 120 miles of U.S. coastline and imperiled a multi-billion dollar fishing industry.

BP placed a containment cap on its blown-out seabed well this month after a series of failures to stem the flow, but oil continues to gush.

It said on Monday its containment cap captured 15,200 barrels of crude Sunday bringing the total since it was installed June 3 to 134,500 barrels.

The Obama administration says the partly contained leak is likely leaking about 35,000 barrels (1.47 million gallons/5.57 million liters) a day. On Saturday it gave BP 48 hours to show how it planned to step up its efforts to capture more crude.

Obama will press BP Chairman Carl-Henric Svanberg at their first meeting Wednesday to set up an independently managed fund to pay damage claims by individuals and businesses hurt by the oil spill disaster.

Gulf Coast residents have been complaining for weeks that the BP claims process was too slow and that the money the company was paying out was too little to make ends meet.

U.S. Senate Democrats have written to BP urging it to make a $20 billion initial deposit to such a fund as a good-faith showing that they will not shirk their responsibility.

Some dealers said the establishment of such a fund could help draw a line under the crisis but others fear it could equate to giving the U.S. administration a blank check.

BP's board meets Monday and while the dividend is expected to be discussed, no decision is likely to be made this week, a spokeswoman said.

A source told Reuters Sunday BP was not planning to scrap the dividend, currently valued at about $10.5 billion annually but was considering deferring it, paying it in shares or paying into a ring-fenced account for investors.

The stock dividend is a big deal in Britain because BP accounts for 12 percent of all dividends paid by UK companies.

BP executives will likely face renewed pressure from lawmakers to suspend or scrap the dividend when they testify at at this week's congressional committee hearings.

Representatives of BP, Exxon Mobil, Royal Dutch Shell, Chevron and ConocoPhillips are due to testify on Capitol Hill on Tuesday, while BP CEO Tony Hayward will make his first appearance at a congressional hearing on Thursday.

Hayward, the public face of BP's response to the spill and a lightning rod for criticism that the company played down the scale of the disaster to reduce its potential liabilities, is expected to face harsh questioning from lawmakers.

The oil giant faced damaging criticism from an unexpected quarter on Monday, as Chevron's chief executive said in an interview with the Wall Street Journal that the April 20 accident was “preventable” . A deputy said if BP had used best practice in the well design the accident would not have happened.

The newspaper said the message was likely to be echoed by other executives at the Tuesday hearing.

“If they say that, it would definitely be damaging for BP,” Evgeny Solovyov, analyst at Societe Generale in London said.

With the crisis nearing the two-month mark, Obama makes his fourth trip to the Gulf on Monday, visiting Alabama, Mississippi and Florida for the first time.

He will stay overnight in the region on Monday and return to Washington on Tuesday and make a nationally televised address at 8 p.m. The address will be broadcast from the Oval office, a setting that was meant to underscore the gravity of the crisis, U.S. media commentators said.

Oysterman Marko Dekovic, who has been unable to fish for three weeks, said fishermen in southern Louisiana feel caught in the middle between BP and the Obama administration.

“Just fix the problem,” 24-year old Dekovic said. ‘'Everything depends on oysters. If you don't make any money on that you lose your house and everything else.”