WRAPUP 2-BP faces test delay, says lobbied in Libya case

By Matt Scuffham and Kristen Hays

LONDON/HOUSTON, July 15 (Reuters) - BP Plc on Thursday faced further delays to a test on its ruptured Gulf of Mexico oil well that could staunch the flow of crude that has polluted the ocean since April.

A leak in a line connected to one of the valves in a capping device is the latest setback for the British company, which could face being barred from getting new U.S. offshore oil and gas exploration leases for up to seven years.

The group, which is in lawmakers' crosshairs over the largest offshore oil spill in U.S. history, also confirmed on Thursday that it had lobbied the UK government over a prisoner transfer agreement with Libya in late 2007. In August 2009, the UK released a Libyan convicted of blowing up a U.S. jet, provoking an angry American reaction.

The spill started after an explosion at a rig on April 20 ruptured an undersea well and killed 11 workers, and has soiled hundreds of miles of shoreline and shut down about a third of Gulf fisheries.

BP installed a capping device on the well on Monday and started shutting a sequence of valves after getting approval from the U.S. government, which had delayed the plan by 24 hours on fears the process could irreparably damage the well.

'The actual well test hasn't got under way yet. When we were doing the final checks and tests we spotted a small leak in a choke line so we're repairing that before the test itself gets under way,' said a BP spokesman.

'It will take them a short while to fix this particular problem and then we'll get the well test itself underway. I would expect that to happen today.'

If tests, which will be assessed every six hours, show that closing the cap might cause further damage to the well, the capping device could instead be used as part of a complex system to capture the oil and siphon it to ships on the surface.

In London, BP shares dipped 0.3 percent to 400 pence, in line with other British blue-chips, as investors waited for the leak to be plugged.

Arbuthnot analyst Doug Youngson said: 'There is quite a lot of nervousness about how effective this cap is going to be and whether it might, in fact, make matters worse. There is a very high degree of uncertainty over which way this is going to go.

'The language was very bullish at the start of the week but it's quite quickly turned around.'

The shares have taken a battering as a result of the spill, with $100 billion in market value being knocked off at one stage, before a three-week rally sparked by takeover talk, speculation about investment by a sovereign wealth fund and hopes that the well would be capped.

















Retired Coast Guard Admiral Thad Allen, who is overseeing the U.S. response to the spill, has said if tests show the well can withstand certain pressures, odds are good it could be 'shut in' indefinitely.



DANGER SIGNALS

But even if the immediate problem of spewing oil is resolved, BP faces more hurdles in doing business in the crucial U.S. market.

On Wednesday, a U.S. house committee passed bill language saying that BP's safety record would bar the company from getting new U.S. offshore oil and gas exploration leases for up to seven years.

And Secretary of State Hillary Clinton said she would look into a request by U.S. lawmakers that the State Department investigate whether BP had a hand in the release of Libyan Abdel Basset al-Megrahi, convicted in connection with the 1988 bombing of a U.S. airliner that killed 270 people.

BP confirmed that it had lobbied the UK government in late 2007 over a prisoner transfer agreement amid concerns a slow resolution would impact an offshore drilling deal with Libya.

'BP told the UK government that we were concerned about the slow progress that was being made in concluding a prisoner transfer agreement with Libya,' BP said, but added that it had not been involved in discussions about al-Megrahi's release.

Anger among Americans over the failure to halt the spill added to President Barack Obama's political problems, distracting him from his legislative agenda and denting his popularity as his Democratic Party faces tough congressional elections in November.



ANGER OVER SPILL

In Buras, Louisiana, crabber Larry Tew said he was hopeful about the cap tests. 'I think it's going to work. ... I mean, they don't have any other choice,' he said.

At least some of the oil from the well has been siphoned off to ships in the past few weeks, but that operation was halted while the tests are undertaken. BP has said that by the end of July four vessels can be hooked up and collect up to 80,000 barrels (3.34 million gallons/12.7 million liters) per day.

That should be more than enough to capture the whole well output, as estimates put the spill rate between 35,000 barrels and 60,000 barrels a day.

The only proven way to kill the leak lies in the drilling of relief wells to intercept the ruptured one. The first of two such wells started in May is expected to intercept it by the end of July and plug by mid-August.

(Additional reporting by Alexandria Sage in Buras, Louisiana, Chris Baltimore in Houston and Matthew Lynley in New York; Writing by Sitaraman Shankar; Editing by Erica Billingham) Keywords: OIL SPILL/ ([e-mail]; [phone], Reuters Messaging: [e-mail]) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.