The supermajor also disclosed that the Macondo spill had so far cost it $350 million, far more than expected.

* UK giant eyes junk shot

* Relief well drilling ahead

* Development Driller II mobilised

* BP asks contractors for details of BOP and safety testing regime

* Moratorium imposed on APDs

* MMS inspectors target production platforms

The wellbore is still pumping an estimated 5000 barrels per day into the Gulf of Mexico.

The supermajor is preparing to lower a second, smaller containment dome over the main leak point on the riser which linked the Transocean semi-submersible Deepwater Horizon to the subsea blowout preventer (BOP) stack and wellhead template.

The small dome will be connected by drill pipe and riser lines to Transocean's drill ship Discoverer Enterprise.

BP spokesman Matt Taylor said the supermajor is confident the small dome - or "top hat" - would not become clogged with hydrates, as the larger dome had been.

"There should be a higher concentration of oil and less sea water under the smaller dome than there was under the large one," he said. "We believe this will hinder the formation of hydrates."

Further details on the smaller dome - including its dimensions - were not immediately available.

The larger Macondome now lies on the sea floor, in 5000 feet of water, and is about 200 metres away from the ruptured riser it was meant to cap. BP has no plans to retrieve the dome at the moment.

In a statement released Monday morning, BP added that further work on the BOP now enables it to attempt a “top kill” option aimed at stopping the flow of oil from the well. This option will be pursued in parallel with the smaller containment dome over the next two weeks.

BP also said the $350 million price tag covered the cost of spill response, containment, relief well drilling, payments to the Gulf Coast states to speed up their response plans, settlements and federal costs.

The final bill is likely to be much higher.

BP faces possible damages pay-outs after survivors of the initial blowout on the Deepwater Horizon, as well as relatives of the 11 men still missing and fishermen's groups lodged suits against the company.

Tourism groups have also complained of losses due to the spill. BP said it would cover all "legitimate" claims for compensation.

Target

While BP wrestles with hydrates formation in the Macondome, the Transocean semi-submersible drilling rig Development Driller III is drilling ahead on the first of two relief wells planned for Macondo.

BP confirmed the well had reached 9000 feet on Saturday - its target depth is about 18,000 feet - adding the drilling was ahead of schedule. It did not provide an update on drilling depth.

Spokesman Mark Salt said that the Development Driller II is now on its way to Mississippi Canyon Block 252, and should arrive on location by the middle of the week.

Should the rig arrive on Wednesday, it is possible the second relief well could spud as soon as the weekend.

BP had warned earlier that hydrate formation was a possible risk with the "Macondome" - but it appears that the supermajor believed that hydrates would form in the riser, not in the dome itself.

It had planned to combat possible hydrate formation by heating the riser via an internal pipe circulating hot water, as well as injecting methanol down the riser from the Discoverer Enterprise, which is sited above the dome.

Taylor said that the same anti-hydrate solutions via the riser would be put into play for the smaller dome.

Slush

"We anticipated hydrates being a problem, but not this significant a problem," BP's chief operating officer Doug Suttles told a press briefing earlier.

"I wouldn't say (the containment system) has failed yet," Suttles added. "What we attempted to do didn't work as hydrates plugged the top of the dome.

"It looks like slush," he said, adding: "There are numerous ways we believe we can manage the problem, including using heat to prevent formation and also methanol injection."

On Saturday, Suttles said the supermajor is still canvassing other, alternative options.

One of these may well be attempting a "junk shot" through Macondo's BOP stack. Taylor said that BP is pressing ahead with junk shot plans.

"We are still deciding on the right combination of materials," he said, adding: "We are getting lower pressure readings which has encouraged us to move forward with this 'top kill' option."

A junk shot involves injecting ground-up material, such as rubber, into the bottom of the BOP in an attempt to clog it. The material would travel upwards into the BOP, blocking it. Kill fluid and cement would then be injected into the well.

“It’s like plugging up a toilet,” Suttles said.

"We are trying to gather data to determine if a junk shot is a good method to proceed with and to make sure we don't make this situation worse," Suttles told Saturday's briefing.

"There are challenges associated with this which could make it worse - we could end up with more oil flowing out the top of the BOP."

Suttles said that BP has already manufactured the equipment it would need to inject cement and fluid into the well and it is being shipped to the location.

It is understood that BP has two cement skids already on Helix’s Q4000 semi-submersible platform, which is already on site to try to place a containment dome over the oil leak.

In a similar option, an industry source told UpstreamOnline that BP may try to fill the broken BOP with cement, using a slurry that will flash set in seconds.

Complicated

After the BOP is plugged, the company could tap into the choke and kill valves on the subsea wellhead to pump heavy fluid and cement down into the wellbore and kill the well.

A third option may be to shear the lower marine riser package and stab a new BOP on top of the existing one.

“That also is a very, very complicated task and also brings risks with it,” Suttles said.

Sources have indicated that this alternative, if it failed, carries a very real risk of creating an absolute open flow blowout. A BP source agreed, saying: "That would be the 60,000 bpd 'worst-case scenario'."

It is understood that if BP pursued this option, the BOP on board the Discoverer Enterprise would be used.

According to Transocean's fleet inventory, the BOP is a Hydril 18¾ inch 15,000 psi, six-ram system with a Cameron 15,000 psi wellhead connector.

Any of these options could likely be carried out before the relief well intercepts the blown-out Macondo bore - an operation Suttles earlier estimated would take about 90 days.

However, none of these alternatives have ever been used before at this depth and depend on pressure readings from inside the crippled BOP.

BP earlier said it began performing surgery on the “brain” of the BOP it recovered, with plans to reinstall it in the hopes it will provide accurate readings of the pressures inside the Macondo well.

Pressures

“We retrieved what is called the yellow pod, this is the sort of brain on the BOP, and brought it to the surface,” Suttles said.

“We are currently working to re-wire that brain. We’re going to redeploy back on the BOP and we hope that will allow us to read pressures inside of it.”

Suttles added that BP has given up trying to close the well with the existing BOP.

“We have exhausted those options," he said. “We worked on that for two weeks.”

Last week, BP capped one of the three leaks identified in the Macondo infrastructure, installing a valve over the end of the broken drill pipe that was sticking out beyond the end of the riser.

Minerals Management Service (MMS) regional director Lars Herbst confirmed that the Obama administration has put a moratorium on issuing new offshore drilling permits until an investigation into the Deepwater Horizon accident is complete.

That investigation is scheduled to wrap up by the end of the month, but no concrete deadline has been set to begin considering applications for permits to drill (APDs).

Herbst said his crews have finished inspecting 30 rigs drilling in the deep-water Gulf of Mexico and found “no causes for concern”.

Detailed

Inspectors reviewed BOP testing records but did not perform new tests. Under MMS regulations, BOP testing is required once every two weeks.

Herbst said crews have now moved on and begun inspections on all deep-water production platforms.

He told Saturday's briefing: "Inspectors will be looking at 47 deep-water structures. These are very detailed inspections."

He added the inspections will take another month or so to complete.

Meanwhile, it emerged that BP has sent a letter to “a number” of its drilling contractors, including Transocean, asking for more information about their safety procedures and BOP testing.

“Since blowout preventers are an intergral part of a safe and successful drilling and completion operation, we request that you specifically confirm that the subsea BOP and associated equipment used on your deep-water drilling rigs currently under contract to BP have been inspected and are routinely inspected, tested and maintained to industry standards and in compliance with applicable regulations,” states a copy of the letter obtained by UpstreamOnline.

“Additionally, if the BOP or associated equipment had been modified from the original design in any way, please confirm: (1) that such modifications were made in consultation with the original manufacturer; (2) used OEM parts; (3) pursuant to a formal management of change process; (4) and in compliance with applicable regulatory requirements.”

The letter sets a deadline to respond to BP of 1 June.

Burns

Meanwhile, in its results filing, Transocean made public that its contract with BP indemnifies it from sub-surface and well-control issues.

Also in the filing, the company made it clear that as part of its contract with the “operator” for the Deepwater Horizon, the “operator” had agreed to defend, release and indemnify Transocean against losses below the surface of the earth and that the “operator” will bear the cost of bringing the well under control in the event of a blow-out or loss of control.

While this is a standard clause in most drilling contracts, analysts Dahlman Rose & Co said BP may sue the company if it were proved that Transocean was negligent in its operations.

As part of its contract with BP, Transocean is only liable for pollution at the surface, and considering the oil slick has originated below the surface, it may be that the company is protected.

Rear Admiral Mary Landry said oil now had hit the shore at Chandeleur Island and Freemason Island, adding that tar balls washed up on Alabama beaches over the weekend.

Meanwhile, five successful burns on Friday devoured between 7000 barrels and 9000 barrels of oil, Suttles said, and the weather is expected to allow more burning in the coming days.

“It is a very powerful technique,” he said.

Though planes are still spraying dispersant on the surface slick, officials are analysing the effectiveness of the subsea dispersants applied at the source of the leaks and no decision has been made whether to proceed with untested method.

People living near the spill zone are becoming increasingly concerned about the possible effects of the dispersants in the water.

Crews are using the same two dispersants, Corexit 9500 and Corexit EC9527A above and below the water, Suttles said.

Corexit 9500 can cause skin and respiratory tract irritation, according to material safety data sheets provided by the Coast Guard.

Hazard

Its overall human hazard potential is “moderate,” the sheets state, while the potential environmental hazard is listed as “low”.

Corexit EC9527A can also irritate the skin and respiratory tract, but it also can damage the liver and central nervous system.

Its human hazard potential is “high” and potential environmental hazard is “moderate”, according to the material safety data sheet.

Meanwhile, US Congress is gearing up its Macondo investigations with a pair of hearings.

The US Senate Committee on Energy & Natural Resources will grill execs from Transocean, BP and Halliburton on Tuesday morning.

Witnesses include BP America boss Lamar McKay, Transocean head Steve Newman and Halliburton safety chief Timothy Probert.

Liability

The House Committee on Energy & Commerce hold its hearing the next day, calling the same three witnesses as well as Cameron boss Jack Moore.

Cameron also received a request from the Energy & Commerce committee to turn over documents related to the BOP aboard the Deepwater Horizon.

Dril-Quip announced in a filing lodged on Friday that its wellhead and other associated equipment were in use on the Deepwater Horizon.

Executives from the company will also be appearing at the joint Department of Interior/Department of Homeland Security hearings.

Last week, a number of Democratic leaders called to increase the liability cap on companies responsible for oil spills from $75 million to as much as $10 billion.

Abandoned

The calls came as BP executive vice president for the Americas & Asia Robert Dudley said the Macondo spill would change the global offshore industry "forever".

"Once the clean up is done, the investigation is complete and the lessons learned and spread around the globe from this activity occurring (at) the frontiers of human effort, we will consider the trade-offs of exploring for new sources of domestic energy in the frontiers of deep water," Dudley told business leaders in Boston.

A BP spokesman later told Reuters that Dudley’s comments referred to society’s commitment to oil exploration and not to BP’s own exploration and development work.

The Macondo well - a discovery well which was to be temporarily abandoned ahead of later completion as a subsea producer - blew out on 20 April.

The well had been drilled to 18,000 feet by the Transocean semi-submersible Deepwater Horizon. An explosion rocked the semisub before the rig was engulfed in flames.

The rig sank on 22 April, extinguishing the blaze.

The initial cause of the accident is still unknown, although a senior Transocean executive, Adrian Rose, earlier indicated it seems likely the well blew out.

Eleven of the 126 crew on board the Deepwater Horizon at the time of the explosion are missing, presumed dead.

Drilling giant Transocean has confirmed nine of its employees are among the missing. Two worked for services outfit Smith International and Schlumberger's M-I Swaco joint venture.

BP has a 65% stake in Mississippi Canyon Block 252. Anadarko has 25% and Japanese player Mitsui the remaining 10%. All are liable for costs on a proportionate basis.

RoughneckCity.com has put together a slideshow of images from the Deepwater Horizon disaster. To watch, click here.

Published: 10 May 2010 07:16 GMT  | Last updated: 10 May 2010 18:57 GMT