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Gulf geyser stops gushing . AP – This image taken from video provided by BP PLC at 14:27 CDT, shows that oil has stopped flowing.

British energy giant BP halted the catastrophic Gulf of Mexico leak for the first time in three months, raising hopes Friday the worst oil disaster in US history may finally be over.

While President Barack Obama and BP warned against celebrating before tests are completed, news that engineers had shut all three valves on a giant cap was a ray of light for coastal communities whose livelihoods have been ravaged.

In London, BP shares jumped 6.53 percent after a disaster that has cost it 3.5 billion dollars (2.78 billion euros). Compensation for damage caused by the millions of barrels of oil that have leaked could reach 10 times that amount.

The announcement was made by BP's senior vice president Kent Wells shortly after BP engineers shut down the last of three valves on the cap placed on the blown-out well at around 2:25 pm (1925 GMT) Thursday.

"I'm very excited to see no oil flowing into the Gulf of Mexico," Wells told reporters, but cautioned it was only the start of a painstaking testing process set to last 48 hours to analyze the condition of the underground wellbore.

Obama, whose administration has led pressure on BP to stop the oil flow, welcomed the news as "a positive sign," but cautioned: "We're still in the testing phase." He said he would address the issue again Friday.

Teeming fishing grounds have been closed and tourists have been scared away -- two vital economic lifelines for the southern region still struggling to recover from the 2005 Hurricane Katrina.

Endangered wildlife has also been increasingly threatened by huge ribbons of oil fouling the shores of five states -- Texas, Louisiana, Mississippi, Alabama and Florida. The clean-up is likely to last years.

The tests are intended to determine whether the wellbore, which stretches 2.5 miles (four kilometers) below the seabed, was damaged during a blow-out on the rig.

BP is hoping to choke off the oil flow from the well, estimated at between 35,000 to 60,000 barrels a day. But doing so from the top could force oil out in new leaks if the wellbore was damaged.

During the test, engineers will take multiple readings from the 30-foot (nine-meter) capping stack placed on top of the wellhead on Monday to monitor the pressure inside.

High pressure readings would allow the three valves to remain shut and the well would effectively be sealed, but low readings could mean there is a hole somewhere in the casing of the well where oil is escaping.

After 48 hours, the engineers will open up the system again and begin capturing the oil through two surface vessels to allow a new seismic survey to be carried out, said the official in charge of the US response, Coast Guard Admiral Thad Allen.

A final solution to the leak is not expected before mid-August, when crews will complete the first of two relief wells, allowing the oil reservoir to be permanently plugged in a "kill" operation.

The disaster began April 20 when the BP-leased Deepwater Horizon oil rig exploded 50 miles (80 kilometers) off the coast of Louisiana, killing 11 workers. Two days later, the still blazing rig sank to the bottom of the Gulf.

Local officials who have since seen their coasts sullied by the oil were cautious but hopeful.

Louisiana Senator Mary Landrieu described the stoppage as "the first piece of good news the Gulf Coast has received in three months."

Still "it is too early to declare victory and there is still a lot more work that needs to be done. The next 48 hours will be critical as they test the pressure of the well and ensure the cap is working properly," Louisiana Governor Bobby Jindal cautioned.

"We have been fighting a war against this oil for months now and we know our battles don't end even when the well is capped. Millions of gallons of oil are still in the Gulf and some estimates show that oil will continue to hit our shores for many more months or maybe even longer."

Meanwhile the Financial Times reported that BP is speeding up the sale of up to 20 billion dollars of assets in a bid to boost funds after the spill.

BP is seeking to build up a disaster fund of 20 billion dollars to cover the clean-up costs for the disastrous oil spill.

Story by Allen Johnson from AFP
AFP 07/16/2010 09:49

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BP halts Gulf oil flow for first time since April