Oil spill clean-up: BP to start funneling oil and gas to surface after cutting pipe

BP succeeded Thursday in cutting a ruptured oil pipe in the Gulf of Mexico and will begin funneling oil and gas to the surface within hours, U.S. Coast Guard Admiral Thad Allen said.

As the White House said President Barack Obama would travel to the Gulf coast again Friday, Allen hailed the latest effort to contain the oil pollution in one of the worst U.S. environmental disasters as "a significant step forward."

After a steep fall Tuesday, BP shares rose in London trading Thursday on market hopes the latest plan would succeed. In early afternoon, they were up about one percent.

In London Fitch Ratings downgraded BP, however, reversing its view that the Gulf of Mexico oil spill would have a limited financial impact on the company.

"We have just cut the riser pipe off of the lower marine riser package," Allen told a news briefing.

This will allow the company to collect at least some of the leaking oil in a containment cap and bring it to the surface.

Oil has been gushing into the Gulf since April 20 when a Transocean Ltd drilling rig Deepwater Horizon licensed to BP exploded killing 11 workers.

Gushing oil has devastated the ecology and economies of Gulf coast states and highlighted the powerlessness of the Obama administration to resolve the crisis.

BP's decision to hold a conference call with financial analysts Friday also buoyed the company's shares. Two U.S. senators said BP should suspend plans to pay shareholder dividends until spill clean-up costs are known.

"We believe BP will bow to political pressure in the U.S. and suspend dividend payments for the remainder of 2010," said a research note from London-based investment bank Evolution Securities.

Louisiana is the state hardest hit so far by oil, though the spill has fouled beaches in Mississippi and Alabama and now poses a threat to the Florida panhandle.

Thousands of fishermen, shrimpers and other seafood workers have been idled for weeks by government-imposed fishing restrictions that cover 37 percent of U.S. federal waters in the Gulf.

Obama, accused by critics of being too slow to respond to the spill, says the government has deployed a massive federal response to contain oil before it hits land and clean-up coastlines. That is not enough for many affected residents.

BP could face billions of dollars in fines and penalties if a Justice Department investigation finds wrongdoing, in addition to billions from the economic liability and damages, according to legal experts.

It may also find it more difficult to meet targets for expanded production in the future, analysts said.