BP to sell $7.06 billion in Argentina assets to help cover gulf oil spill costs

BP has agreed to sell its share of an Argentina-based oil and gas company for $7.06 billion in cash, bringing to about $21 billion its total sales of assets to help cover costs stemming from the Gulf of Mexico oil spill.

After the sale, BP will be most of the way toward its goal of selling as much as $30 billion in assets by the end of 2011 to help cover spill costs and bolster cash holdings to assure investors and lenders of the oil giant's financial stability. The sales are expected to reduce BP's assets by 10 to 15 percent.

The price of the Argentina operations fell $2 billion to $3 billion short of what many analysts expected. Nonetheless, the latest sale of what is considered a non-core asset for BP demonstrates the huge scale of the London-based oil firm's operations. In addition to asset sales, BP is raising more than $2.5 billion a quarter for spill costs from the suspension of its dividend.

BP announced Sunday that it would sell its 60 percent interest in Pan American Energy's oil and gas operations in Argentina to Bridas Corp., which already owns the other 40 percent.

BP acquired the interest when it bought Amoco in 1999. Since then, BP has revived output from the aging Argentine fields, which now produce about 100,000 barrels of oil a day and 450 million cubic feet of natural gas per day. The vast bulk of that production comes from one field, Cerro Dragon, about 900 miles south of Buenos Aires.

But Argentina's tax policies have diminished the attractiveness of operating there, analysts said.

Bridas was founded by the Bulgheroni family of Argentina. In May, the China National Offshore Oil Corp., which has been expanding its worldwide operations, bought 50 percent of Bridas for $3.1 billion. CNOOC's deep pockets helped make the BP sale possible; it will provide much of the cash for the transaction.

The price CNOOC paid earlier this year for its share of Bridas led many analysts to believe that BP would get more for its interests. The CNOOC purchase of Bridas implied a value of $15.5 billion for the entire Pan American Energy operation. That would have translated into a price of $9.3 billion for BP's share.

The sale does not include Pan American's operations in Bolivia.

"Today's agreement further demonstrates both the high quality and attractiveness of the assets throughout BP's global portfolio and also the company's ability to meet our significant financial commitments arising from the Gulf of Mexico tragedy," BP chief executive Bob Dudley said in a statement.

At the end of the third quarter, BP had incurred costs of $11.6 billion as a result of the oil spill, not counting the $3 billion first installment it had paid into a $20 billion escrow fund. Even after those payments, the company had nearly $13 billion in cash and $17 billion of bank facilities it could draw down. The company expects the total cost of the oil spill to ultimately reach $40 billion.

Dudley said BP would seek to sell other assets that might be "strategically more valuable to others than to BP."

Under the terms of the agreement, Bridas will pay BP a cash deposit of $3.53 billion, with the balance of the proceeds due on completion of the sale, which is expected to be completed by Dec. 28.

In China, CNOOC announced that it would join with Bridas's Argentine shareholders to provide $4.94 billion, or 70 percent, of the purchase price. The remaining 30 percent will be covered by loans, or additional cash contributions if necessary.

As of Dec. 31, 2009, BP's 60 percent interest in Pan American accounted for 917 million barrels of oil equivalent reserves, about 5 percent of the company's overall reserves. Production from Pan American accounted for 3.6 percent of BP's global output.

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When oil prices rise, Russia has freedom over a barrel

The judge had already postponed the verdict without explanation ("The court does not explain itself," said a spokesman). Before reading it, he barred journalists and the defendant's family from the courtroom. No one should have been surprised, therefore, when Mikhail Khodorkovsky - the Russian oil baron who once defied the Kremlin - received a further six years in prison last week, on top of the eight he's served. This time, he was sentenced for "stealing" an impossible quantity of oil, the same oil he has already been accused of selling without paying taxes.

In fact, nobody pretended that the Khodorkovsky verdict was anything but a political statement, one of a series of gestures the Russian government has made to its own public and to the rest of the world in recent weeks. The blocking of corruption investigations; the expressions of support for the brutal and violent "elections" in neighboring Belarus; the deaths of journalists; all of these seem designed to contradict the distinctly friendlier, reformist language that the Russian president, Dmitry Medvedev, was using until recently. A mere two years ago, Medvedev had even denounced Russia's culture of "legal nihilism" - a phrase some construed as a reference to the Khodorkovsky case.

Why the change of tone? Why now? Many complex theories have been hatched to explain it. This being Russia, none can be proved. But perhaps the explanation is very simple: Oil is once again above $90 a barrel - and the price is rising. And if that's the reason, it's nothing new. In fact, if one were to plot the rise and fall of Soviet and Russian foreign and domestic reforms over the past 40 years on a graph, it would match the fall and rise of the international oil price (for which domestic crude oil prices are a reasonable proxy) with astonishing precision.

To see what I mean, begin at the beginning: In the 1970s, oil prices began to rise significantly, along with the then-Soviet Union's resistance to change. The previous decade (with oil prices at $2 or $3 a barrel, not adjusted for inflation) had been one of flux and experimentation. But after OPEC pushed prices up in the 1970s, oil revenue poured in - and the Soviet Union entered a period of internal "stagnation" and external aggression. Soviet leader Leonid Brezhnev invested heavily in the military, halted internal reforms and in 1979 (when oil was at $25 a barrel) - invaded Afghanistan.

Brezhnev was eventually followed by Yuri Andropov, who had the good fortune to run the Soviet Union when oil prices were still high (at his death, in 1984, they averaged $28 a barrel). Andropov could thus afford both an internal crackdown on dissidents and a continued tense relationship with the West. But Andropov was followed by Mikhail Gorbachev, who took over just as prices plunged. In 1986 (with oil down to $14 a barrel), he launched his reform programs, perestroika and glasnost. By 1989 (when oil was still only at $18) he allowed the Berlin Wall to fall, freed Central Europe and ended the Cold War.

Prices fluctuated, but they did not really rise again in the 1990s (plunging as low as $11 in 1998), the years when Boris Yeltsin was still trying to be best friends with Bill Clinton, the Russian media were relatively free and there was still talk, at least, of major economic reforms. But in 1999 (when oil prices rose to $16 a barrel), Yeltsin's prime minister, Vladimir Putin, launched the second Chechen war, the West bombed Belgrade, and the mood in Russia turned distinctly anti-Western once again.

The fortunate Putin took over as president in 2000, at the start of a long and seemingly inexorable rise in oil prices. Indeed, Gorbachev's calls for internal reform were long forgotten by 2003 (when oil prices were creeping up to $27 a barrel). The days when Yeltsin pushed for Russia to join Western institutions were a distant memory by 2008, when Russia invaded Georgia (and oil was at $91 a barrel).

The new Russian president, Dmitry Medvedev, did try to sound nicer in 2009 (when oil prices averaged about $53 a barrel), leaving Putin, now the prime minister again, grumbling in the background. Medvedev locked a draconian treason law, invited democracy activists to the Kremlin, denounced the Belarusan dictator and even seemed to some to have liberalized Russian television just a bit.

But now it is 2011, Putin is very much in the foreground, and Khodorkovsky has just been sentenced by a kangaroo court. As I write these words, oil is at $92.25 a barrel.

Is this analysis too simplistic? Sure it is. But I haven't yet heard a better explanation.

applebaumletters@washpost.com

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Gasoline prices hit eight-month low

With the end of the summer driving season just around the corner, traders and investors on Monday drove gasoline prices to an eight-month low on U.S. commodities markets, providing the latest sign of pessimism about the economic recovery.

The sagging commodity market price for gasoline is good news for American motorists, promising a mild easing in pump prices. It also marks the end of a summer of relative stability for retail gasoline prices, which have fluctuated by about 20 cents per gallon since the beginning of the year and have stayed in an 8-cent range for the past 69 days.

Prices have been stuck in neutral because of the continuing weak global economy and fundamental shifts in the U.S. gasoline market, the world's biggest.

The surge in U.S. consumption that many refiners expected earlier this year has not materialized. Last week, the American Petroleum Institute reported that in July, U.S. gasoline deliveries (a measure of demand) were 9.3 million barrels a day, down slightly compared with July 2009. Except for 2008, it was the lowest July gasoline demand number since 2003.

A lack of consumer confidence and continuing high unemployment have kept people cautious about spending and traveling. "With unemployment high and July regular gasoline prices more than 20 cents a gallon above those a year ago, consumers likely have been shopping and vacationing less and trimmed their gasoline purchases accordingly," said John Felmy, the institute's chief economist.

But long-term trends -- such as improvements in the fuel efficiency of American autos -- played a part too, other analysts said. A steady increase in the biofuels component of U.S. motor fuel is another reason; the four week average for ethanol production ending Aug. 13 was 854,000 barrels a day, up nearly 18 percent from a year ago and now more than 9 percent of the volume of motor fuel, according to the Renewable Fuels Association.

With consumption lackluster, U.S. oil companies have been left holding much bigger than usual inventories of gasoline. That, combined with renewed pessimism about U.S. economic prospects, has prompted traders to increase their short selling of gasoline -- betting on a further decline in prices. Short positions jumped 20 percent in the week ended Aug. 17, according to figures compiled by Barclays Capital.

Crude oil prices have also tumbled after a brief surge. The price of a barrel of the benchmark West Texas Intermediate type of crude for delivery next month stood at $72.70 at the end of Monday, down from $82.55 on Aug. 3.

"What is amazing is the degree to which the trading community failed to understand that the gasoline season ended at Memorial Day weekend," said Edward Morse, a veteran oil analyst at Credit Suisse who has been predicting stable prices for months. "All the evidence was in sight that the market was going to be oversupplied."

Morse said that refinery output was "too high, Europe was exporting too much [fuel], biofuel blending components were rising, and the fuel efficiency of the fleet has grown remarkably in the past four years."

The American Automobile Association said Monday that the average retail price of a gallon of regular gasoline eased to just under $2.71 a gallon, down more than 4 cents from a week ago and up only 8 cents from a year earlier, when the economy was more deeply mired in recession.

There have been some signs of economic recovery, however, in petroleum statistics recently. The Petroleum Institute said that there was an 11.6 percent increase in deliveries of low sulfur distillates, which are primarily diesel fuels used in trucking, and a 6.9 percent increase in kerosene jet fuel deliveries. The price of diesel fuel also fell 4 cents a gallon in the past week, but it has climbed 28 cents from a year ago.

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Oil spill report lays much blame on BP, who knew of Halliburton weaknesses

The chief counsel of the presidential oil spill commission has issued a final report laying considerable blame on BP for last year's disaster in the Gulf of Mexico. But he also points to flaws in Halliburton's work and errors by rig owner Transocean.

Fred H. Bartlit Jr., a prominent trial lawyer, said that for three years BP had been aware of problems with lab tests of Halliburton cement; that a reorganization of BP's engineering department resulted in delays; and that BP decided not to set a lockdown sleeve, an installation deep in the well, during its preparations for temporary abandonment in order to save 51/2 days and $2 million in costs.

He also said BP's well-site leader was not present, as he should have been, during a critical test known as a negative pressure test that indicated something was wrong.

Bartlit's report is the latest of a series from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, which has already faulted a variety of factors, including decisions made by the well operator BP, rig owner Transocean, oil service provider Halliburton and federal regulators.

In a statement Thursday, BP did not dispute the report's specifics. The London-based oil giant said that it "has made every effort to understand the causes of the Deepwater Horizon accident to help prevent similar events from occurring in the future." BP said the presidential commission's findings - "particularly that the accident was the result of multiple causes, involving multiple parties - are largely consistent with those contained in the BP internal investigation report." It added that it is reorganizing its safety operations and reviewing its supervision of contractors.

Halliburton and Transocean did not issue comments.

Bartlit noted that in 2007, a consulting firm issued a quality-control report warning BP that Halliburton's lab technicians "do not have a lot of experience evaluating data" and that BP needed to improve communication with Halliburton "to avoid unnecessary delays or errors in the slurry design testing."

A cementing expert at BP described the "typical Halliburton profile" as "operationally competent and just good enough technically to get by." And BP's engineers said that the Halliburton engineer assigned to the doomed Macondo well was "not cutting it" and that he often waited too long to conduct critical tests. But, Bartlit added, the BP engineers neither reviewed his work at Macondo carefully nor checked to see that he conducted testing in a timely manner - even though they knew that their last-minute changes to the cement design test could cause problems and that using nitrogen-foamed cement could pose "significant stability challenges."

Bartlit also said the blowout preventer was not to blame for the explosion on the drilling rig, the Deepwater Horizon, that killed 11 workers April 20. The report says that by the time the rig crew tried to close the blowout preventer on the sea floor, deadly gas had already slipped into the riser pipe leading to the rig.

Although the route that gas took through the well when it blew out has been a matter of uncertainty, Bartlit's report says physical evidence taken from the well shows that oil and natural gas "almost certainly" came to the surface through a piece of equipment called the "shoe track" and up the production pipe. The report says cement in the shoe track should have blocked that flow, which it says further calls into question the quality of the cement job done by Halliburton.

Bartlit also faults Transocean, whose rig workers missed several signs of trouble in the well. Earlier alarm might have prompted them to close the blowout preventer earlier, avoiding catastrophe.

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Increase in oil revenue amid unrest in Arab world gives Russia some breathing room

MOSCOW - With the price of oil climbing to more than $100 a barrel, Russia has a little more weight to throw around on the world stage, and it is doing just that.

The stepped-up flow of petrodollars into the government's coffers relieves what had been a worrisome budget deficit and lessens the urgency of reform. Good relations with the West - and especially the "reset" with Washington - are not quite so pressing when the economy here is in good shape.

Russia is benefiting tangibly from the turmoil in the Middle East and North Africa. Urals crude sold for $113 this week, up from $75 a year ago. Of that, $76.50 goes into the Russian treasury. And the spike in oil income has compensated for growing weakness elsewhere. It arrived just as Gazprom - the natural-gas giant that until recently was a potent weapon in Russia's foreign policy - has seen its clout in Europe washing away amid a flood of competition.

An emboldened Prime Minister Vladimir Putin was in Brussels in late February angrily lecturing the Europeans on energy policy and the uprisings in the Arab world. After months in which Moscow and Washington have tried to put their differences over Georgia on a back burner, President Dmitry Medvedev two weeks ago accused the country of threatening the security of the 2014 Winter Olympics, to be held in Sochi, near the border of a breakaway region of Georgia.

Earlier this year, Russia's warming relations with Poland went sour over the handling of the investigation into the plane crash that killed Poland's president and other top leaders this past spring.

But with increased oil revenue also comes the danger of complacency. Bureaucrats, defense contractors, pensioners and workers in construction and finance all stand to gain from the money coming in, along with the oil companies. But the cash also feeds corruption, encourages increased financial opacity and discourages attempts to shake up the system - all of which could spell trouble for Russia down the road.

"All of the dominant groups in Russia get a share of the increased oil revenue," said Alexander Auzan, an economist and adviser to Medvedev. "Yet it contradicts their long-term interests."

Largest oil producer

It's a powerful prop for the status quo - which Auzan and others say is unsustainable.

But as Sergei Guriev, head of the New Economic School in Moscow, pointed out, any change is going to involve a cost for someone, so why take the risk if the money is flowing in?

Russia is currently the world's largest oil producer. When the price last spiked, in 2007, Moscow was flooded with money and people close to Putin were suggesting that Russia was genuinely self-sufficient and had no need to engage more deeply with the West. The economic crisis the following year brought that talk to an abrupt end, and Medvedev began pushing for a Western-oriented program of modernization and diversification away from dependence on energy exports.

The Kremlin moved to stimulate the economy in 2008 by increasing government salaries and hiking pensions by 35 percent. Now it is stuck with those increases. With oil revenue providing 40 percent of the Russian budget, the Gaidar Institute for Economic Policy here has calculated that at any price less than $105 a barrel the government will be in the red.

That tempers any inclination toward hubris, said Daniel Treisman, a political scientist at UCLA who follows Russian developments. The Kremlin was looking at a difficult financial crunch, with parliamentary elections coming late this year and a presidential election next March, so the timing of this rise in revenue is more a relief than a goad to aggressive behavior.

"We don't need high prices," said Leonid Grigoriev, an economist and former World Bank adviser. "We need good relations, a long-term market and reasonable prices," which he put in the $70-to-$90 range.

Russia will not turn its back on the West, by any means, he said. But, especially in an election year, its leaders may be more vocal in pointing up differences with the West. In 2010, Russia had enough problems at home that it was actively trying to avoid them abroad; now, with money to address domestic issues, that caution may not be so evident.

Treisman, like many others, did not think much would ever come of Medvedev's modernization plans - it's not the sort of change, he said, that can be ordered from the top down. But the oil bulge makes the Westernization of the Russian economy less likely. It helps big companies - which, Grigoriev said, already dominate the economy to a much greater extent than in other developed countries - and it hurts small ones, where jobs and creativity tend to be nurtured.

Information technology firms, with high labor costs, will suffer, Guriev said, and they are central to Medvedev's vision for the future of Russia.

Gazprom loses clout

Part of what got Putin so riled up in Brussels was Europe's treatment of Gazprom, a gigantic state-owned operation that at one time had unchallenged sway in the European energy market. Gazprom was a powerful tool in the Kremlin's hands, useful when threatening Ukraine and a reminder to the rest of Europe that Russia had to be given its due.

But that was before American companies began extracting cheap natural gas from shale deposits, and before developments in liquefied natural gas (LNG) technology made inexpensive transportation by ship possible.

Qatar set up a new LNG port to ship gas to the United States, but when it couldn't compete there it turned to Europe instead. Today, Europe can buy gas cheaper from Qatar than it can get by pipeline from Russia. European companies have been renegotiating their contracts with Gazprom - downward - and the European Union has insisted that Gazprom divest itself of its pipelines.

Russia will still sell gas to Europe, said Pierre Noel, an energy expert at England's University of Cambridge, "but the pricing regime is changing." Gazprom, he said, will eventually have to change with it.

But the turmoil in North Africa has temporarily masked even Gazprom's difficulties. When the Libyan gas pipeline across the Mediterranean was shut down, Italy, which is Gazprom's second-biggest customer, relented for now in trying to renegotiate its contract.

If production in Algeria, a much bigger supplier than Libya, were to be disrupted, that would make Gazprom a power to be reckoned with again.

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Prices of crude oil and gasoline rise as violence in Libya upsets markets

Crude oil prices in New York broke through the $100-a-barrel threshold Thursday as violence in Libya continued to shake world financial markets and threatened to sidetrack the U.S. economic recovery.

But prices fell back later in the day, after a Saudi official said the kingdom would make up for any Libyan production lost as a result of upheaval there and the International Energy Agency said it was ready to release emergency stockpiles. President Obama also said the United States would be able to "ride out" the disruption in oil supplies.

After touching $103.41 a barrel, crude oil for April delivery ended up down slightly for the day, at $97.28 on the New York Mercantile Exchange. In Europe, the price of Brent grade crude oil, another important benchmark, hit $119 a barrel before dropping back to $114.

But the triple-digit petroleum price weighed heavily on stock markets for much of the day and heightened fears that high fuel costs could be a drain on consumers. Thursday's closing price was still about 50 percent higher than the price nine months ago and the higest level since September 2008.

For U.S. consumers, higher oil prices most directly affect drivers and truckers, who devour the vast majority of U.S. petroleum products. U.S. pump prices for regular gasoline jumped 4 cents a gallon overnight, to $3.23, an eight-cent increase in the past week and 55 cents more than a year ago.

"Coming just before springtime, the timing of the latest crude oil price spike is foreboding. If crude prices were to stay around $100 per barrel, we could expect to see the price for a gallon of unleaded regular rise to about $3.40 in the not-too-distant future," said John B. Townsend II, AAA Mid-Atlantic's manager of public and government affairs. "Motorists across the country are already spending in excess of$1.2 billion a day on fuel purchases, and that's likely to increase in coming weeks."

But oil is a component in the price of a vast variety of goods, including air tickets and food. Higher prices hit big users such as Wal-Mart, petrochemical firms and the U.S. military.

At FedEx, which every month adjusts its fuel surcharge on customers, chief executive Fred Smith said that higher fuel prices would have "not an enormous effect" but that "what's of much greater concern is the effect on the economy overall." He said high fuel prices were like a "tax imposed on the American economy" that would hurt people's buying power.

Because most U.S. oil is imported, money from gasoline sales is largely flowing overseas, inflating the U.S. trade deficit.

Adam E. Sieminski, chief energy economist at Deutsche Bank, said every $5 increase in oil prices could shave two-tenths ofa percent off global economic growth. "If growth was supposed to be 4 percent and ends up being 3 percent, that would be a nasty surprise," he said.

The price of crude oil has surged since Libyans began a revolt against leader Moammar Gaddafi last week, although it has been climbing for most of the past year.

Goldman Sachs analysts warned in a report that Libya's unrest created "significant upside risk" and reduced the ability of the Organization of Petroleum Exporting Countries to respond to further supply disruptions.

Some analysts argued, however, that the spike in oil prices was an overreaction to the political upheaval in North Africa and the Middle East. Michael Kouri, an analyst with UBS Securities Canada, said it was "a dramatic reaction since current disruption to crude supply at present is minimal."

Libya produces about 1.5 million barrels a day, or nearly2 percent of the world's supplies. Some of that oil is still moving, companies said. Repsol, a Spanish oil company, said production in the Libyan fields in which it is a partner was running at 160,000 barrels a day, down from 360,000. Eni chief executive Paolo Scaroni said in Rome that Eni's net production was 120,000, down from 280,000 barrels. Analysts also said more than 350,000 barrels a day of production comes directly from offshore platforms.

Moreover, world stockpiles of crude oil are substantial. The Goldman report noted that spare production capacity and inventories could cover more than 100 days of consumption even if Libya halted all exports.

But a trader at one major U.S. refiner said traders were worried about unrest spreading to Algeria or some other major oil-exporting country.

"What we don't want is for another oil producer to get involved in this," Sieminski said.

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Suit alleges BP cut back on safety before oil spill

The New York State comptroller, the Ohio state pension funds and other large investors have alleged that BP made cost-saving cutbacks in its safety operations prior to last year's major oil spill and that it disregarded safety warnings from its own managers.

The new documents in a securities fraud class action suit allege that the company "terminated" Curtis Jackson, then a senior manager for Gulf of Mexico operations, and Phil Dziubinski, a senior safety official at BP Alaska who warned of worker fatigue from extensive overtime.

Dziubinski's quarrel with BP was described earlier in the Wall Street Journal, which said he and BP had reached a confidential settlement.

The new filing also says that Kevin Lacy, described as BP's senior vice president for drilling operations in the Gulf of Mexico, resigned in late 2009 "because of disagreements with BP over its lack of commitment to process safety." The lawsuit says that Lacy had been recruited from Chevron to improve BP's drilling protocols.

BP spokesman Scott Dean said the company would not comment on pending litigation.

The investors, represented by the firms Cohen Milstein Sellers & Toll of Washington and Berman DeValerio of Boston, produced what they said was an internal BP document that said: "It's become apparent that process-safety major hazards and risks are not fully understood by engineering or line operating personnel. Insufficient awareness is leading to missed signals that precede incidents and response after incidents, both of which increases the potential for and severity of process-safety related incidents."

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BP finishes pumping cement in final stage of 'static kill'

BP has finished pumping cement into the blown-out Macondo well in the Gulf of Mexico as part of its efforts to permanently plug the source of the nation's worst oil spill, the company said Thursday.

Engineers started the cementing operation at 10:15 a.m. EDT and completed it at 3:15 EDT. It was the second step in the "static kill," in which heavy mud was first pumped into the well from the surface to stop it from leaking crude into the gulf.

BP said in a statement that the static kill procedure will "complement" a separate effort to plug the well through a relief well that is nearing completion in a technique known as the "bottom kill."

Earlier, the company announced that retired Coast Guard Adm. Thad W. Allen, the national incident commander for the disaster, had authorized the cementing operation, which was under consideration following the successful effort to pump mud into the well.

The development comes a day after the Macondo well became an apparently harmless hole in the seafloor, clogged with 13-pound-per-gallon gunk, and barely more of a threat to spew oil into the Gulf of Mexico than to start gushing lemonade.

On the 107th day of the Deepwater Horizon disaster, the well that tormented the nation had flatlined. Federal officials then green-lighted the cementing of the well, already jammed with mud, late Wednesday. Federal waters are reopening gradually to fishing. The oil slick, the once-horrific expanse of red-orange mousse and silver sheen, has largely disappeared, federal scientists said Wednesday, even though the amount of oil left is more than four times that dumped by the Exxon Valdez.

The Obama administration breathed a sigh of relief, holding a midday news conference featuring top officials who claimed credit for guiding BP in getting the well under control. Officials hastened to remind the public that Macondo won't be incontrovertibly dead until a relief well drills into it near its base and plugs it with cement. But even the cautious Allen, the official in charge of the federal response to the disaster, called the static kill a "fairly consequential" event and a "very significant step."

About three-quarters of the nearly 5 million barrels of oil that escaped Macondo has evaporated, dissolved or been dispersed by chemicals, skimmed by boats, burned, weathered and, most important, devoured by the Gulf of Mexico's permanent oil-eating microbial workforce, according to a study released Wednesday by the National Oceanic and Atmospheric Administration and Interior Department.

"Mother Nature is assisting here considerably," said NOAA administrator Jane Lubchenco.

This should terminate, once and for all, the more apocalyptic scenarios for the demise of the gulf and the spread of oil to Atlantic shores. There is no sign that the oil is going to ride the Loop Current onto the beaches of South Florida, the Outer Banks, Bermuda, Ireland and so on.

Just a month ago, the spill was an uncontrolled calamity: Macondo mocked the technological skills of the world's petroleum engineers, and oil was slathering birds and turtles and tar-balling hundreds of miles of coastline. The turning point came when BP put a new tight-fitting cap on the well July 12 and closed the valves three days later, cutting off the ugly geyser of oil that had become a dominant image of the summer.

Federal scientists have said that vigilance would be called for even after the static kill procedure worked, which, according to BP in a 2 a.m. announcement, it did. BP sent out a bulletin declaring success after spending eight hours pumping mud into the well from surface ships.

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