UPDATE:US Govt:Macondo Integrity Test Could Continue Under Careful Monitoring

(Updates with additional background, comments from head of federal spill response effort) HOUSTON (Dow Jones)--The top U.S. government official overseeing the oil spill response effort said Sunday that the test of a new containment system that is currently capping the Deepwater Horizon crude leak could be extended in 24-hour increments, as long as careful observation by BP Plc (BP, BP.LN) and U.S. scientists determines there's no irreversible damage to the well or the seafloor. Retired U.S. Coast Guard Admiral Thad Allen said in a statement that the ongoing well integrity test will continue until 4 p.m. EDT on Sunday and that subsequent extensions can be approved--but BP will have to engage in "significant new monitoring" of whether there's any leakage of hydrocarbons from the seafloor. The U.S. government's science team must approve the extension, Allen said. Earlier on Sunday, BP had said that the testing of a containment cap, which has been proceeding without problems and has shut-in the flow of oil from the Macondo well since Thursday, could continue until the mile-deep leak is plugged by a relief well in mid-August. The government's blessing, if the tests pan out, could be a sign that one of the worst uncontrolled oil gushers in U.S. history has come to an end. The test, originally scheduled to last 48 hours, was extended on Saturday to allow for additional monitoring of the sea floor for signs of new leaks. But BP Chief Operating Officer Doug Suttles said in a teleconference that results so far have been encouraging. Pressure is building slowly, but the readings are lower than expected--a sign that the oil reservoir is partially depleted, Suttles said. However, Allen's statement indicated that the lower-than-expected pressure readings are still a cause of concern. Allen acknowledged the possibility of reservoir depletion, but also said that the readings could be explained by potential leakage caused by damage to the well. "While we are pleased that no oil is currently being released into the Gulf of Mexico and want to take all appropriate action to keep it that way, it is important that all decisions are driven by the science," said Allen. "Ultimately, we must ensure no irreversible damage is done which could cause uncontrolled leakage from numerous points on the sea floor." In an early morning conference call, Suttles said that BP is "hopeful that if the encouraging signs continue we'll be able to continue the integrity test all the way to the point we get the well killed," said Suttles. "Right now there is no target set to open the well back up to flow." Suttles added that reopening the well remains a possibility if problems are encountered, but so far there have been no issues. "We're just taking this day by day," he said. The first of two relief wells being drilled to permanently kill the leaking Macondo well by flooding it with cement could reach its target by late July, Suttles said. But the kill operation, which involves flooding the leaking well with cement, could last until mid-August, he added. BP will conduct a "ranging run" to determine the location of the first relief well, and will insert the last string of casing into the well, an operation that may take a week to complete, Suttles said. Then the company will resume drilling to finally intersect the Macondo well, a very slow process scheduled to begin in the last week of July. "All things are looking good at this point," Suttles said. BP still has to drill 100 feet vertically and four feet horizontally to reach its target, Suttles added. The capped well was estimated to be gushing between 35,000 and 60,000 barrels of oil a day into the Gulf, beginning shortly after the April 20 blast aboard Transocean Ltd.'s (RIG) Deepwater Horizon rig, which BP had leased to drill a well in its Macondo prospect. The spill, now one of the largest in U.S. history, has had a severe impact on fishing and tourism along the Gulf Coast. BP has paid more than $200 million in damage claims to residents and businesses, and has set up a $20 billion fund to pay for damages related to the spill. Suttles said that as of Sunday morning, the well's pressure was at 6,778 pounds per square inch, and rising at a rate of 1 or 2 psi per hour. Suttles reported the presence of bubbles in the area being monitored. He said that BP does not believe the bubbles are related to hydrocarbons, but they're being closely watched, he said. -By Angel Gonzalez, Dow Jones Newswires; angel.gonzalez@dowjones.com; 281-536-3064 (Brian Baskin contributed to this story) (END) Dow Jones Newswires July 18, 2010 14:29 ET (18:29 GMT)