U.S. largest oil field in shutdown: pipe corrosion

[Guest]

BP shutdown to remove 8 pct. of US crude

By MARY PEMBERTON, Associated Press Writer

5 minutes ago

Oil company BP scrambled Monday to assess suspected pipeline corrosion that will shut shipments from the nation's biggest oilfield, removing about 8 percent of daily U.S. crude production and driving oil prices sharply higher.

BP, which is already facing a criminal investigation over a large spill in March at the same Prudhoe Bay oilfield, said it did not know how long the field would be offline. "I don't even know how long it's going to take to shut it down," said Tom Williams, BP's senior tax and royalty counsel.

While BP suspects corrosion in both damaged lines, it can't say for sure until further tests are complete. Workers also found a small spill of about 4 to 5 barrels, which has been contained and is being cleaned up, BP said.

The news sent the price of light, sweet crude oil up $1.53 to $74.57 a barrel in electronic trading Monday on the New York Mercantile Exchange.

Steve Marshall, president of BP Exploration Alaska Inc., said Sunday night that the eastern side of the Prudhoe Bay oilfield would be shut down first, an operation anticipated to take 24 to 36 hours. The company will then move to shut down the west side, a move that could close more than 1,000 Prudhoe Bay wells.

Once the field is shut down, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production or about 2.6 percent of U.S. supply including imports, according to data from the U.S. Energy Information Administration.

The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.

A 400,000-barrel per day reduction in output would have a major impact on oil prices, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo. A barrel contains 42 gallons of crude oil.

"Oil prices could increase by as much as $10 per barrel given the current environment," Emori said. "But we can't really say for sure how big an effect this is going to have until we have more exact figures about how much production is going to be reduced."

But Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said he expected the impact to be minimal since crude inventories are high.

"So while this won't have any immediate impact on U.S. supplies, the market is in very high anxiety. So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage."

Marshall said tests Friday indicated that there were 16 anomalies in 12 areas in an oil transit line on the eastern side of Prudhoe Bay. Tests found losses in wall thickness of between 70 and 81 percent. Repair or replacement is required if there is more than an 80 percent loss.

"The results were absolutely unexpected," Marshall said.

BP America Chairman and President Bob Malone said Prudhoe Bay will not resume operating until the company and government regulators are satisfied it can run safely without threatening the environment.

"We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause," Malone said in a statement.

The shutdown comes six months after the North Slope's biggest ever oil spill was discovered on a Prudhoe Bay transit line. Some 267,000 gallons of oil spilled. BP installed a bypass on that line in April with plans to replace the pipe. Only one of BP's three transit lines is now operating.

BP puts millions of gallons of corrosion inhibitor into the Prudhoe Bay lines each year. It also examines pipes by taking X-rays and ultrasound images.

A prolonged Prudhoe Bay shutdown would be a major blow to domestic oil production, but even a short one could be crippling to Alaska's economy.

Edited August 7, 2006 by hoss

[xfirefighter484x 234]

Great. Being the poor college student I am, this isn't going to help me out at all. How the hell are we supposed to afford this cr**??

[Guest]

BP: Pipeline closing may last for months

By MARY PEMBERTON, Associated Press Writer

33 minutes ago

BP said Monday it discovered corrosion so severe that it will have to replace 16 miles of pipeline at the huge Prudhoe Bay oil field — work that could shut down the nation's single biggest source of domestic crude for months and drive gasoline prices even higher.

Oil prices climbed more than $2 a barrel on the news, and gasoline futures rose, too. The West Coast is expected to be squeezed particularly hard, and the government is considering releasing oil from its emergency stockpile to ease the crunch.

BP PLC said it will have to replace most of the 22 miles of so-called transit pipeline at Prudhoe Bay, which produces about 2.6 percent of the nation's daily supply including imports, or about 400,000 barrels a day.

BP, the world's second-largest oil company, discovered the extent of the corrosion with tests that were ordered by the federal government after a big oil spill last March at Prudhoe Bay, situated above the Arctic Circle, 650 miles north of Anchorage.

The oil company said it was surprised to find such severe corrosion, and had gone 14 years without using a device called a "pig" to clean out its lines because it did not believe it was necessary.

Bob Malone, chairman of BP America, said that in a worst-case scenario, it could take weeks or months to replace the pipelines. But the company said it will try to put portions of the network back into operation as they are repaired.

"BP deeply regrets it has been necessary for us to take this drastic action," Malone said

[Guest EMSwhitecloud]

That's just great.. I have to drive to Canada at the end of next week.....this is going to be expensive

[Guest]

Well I guess now 3 dollars a gallon will be cheap because we'll be paying 4 dollars now :angry:

[AndyC3J 190]

Yeah, and the prices will probably spike immediately, before the effect is even felt, and watch how long it takes them to come back down once the problem is rectified. More "record profits" for the oil companies.....I can see it now.

[Guest]

Disgraceful !!

September 8, 2006

BP's Top U.S. Pipeline Inspector

Refuses to Testify

By JOHN J. FIALKA

September 8, 2006; Page A3

The Wall Street Journal

WASHINGTON -- The chief pipeline-inspection expert for the U.S. subsidiary of BP PLC took the Fifth Amendment under oath before a House Energy and Commerce panel rather than explain what he knew about corrosion in the oil company's Prudhoe Bay pipelines in 2002.

Richard Woollam, who managed corrosion-control and inspection teams, also refused to respond, on the advice of his lawyer, to the committee's allegations that he reduced inspection personnel responsible for monitoring 22 miles of pipelines leading from the giant oil field by 25%, after an outside contractor suggested that accumulating sediment in the lines might be corroding them.

A BP spokesman said Mr. Woollam remains with the company but no longer runs its Alaska inspection efforts and has been placed on leave.

Steve Marshall, president of BP Exploration Alaska Inc., which manages Prudhoe Bay, said neither he nor other BP officials knew about serious corrosion problems until March 2, when 250,000 gallons of crude oil spilled onto the tundra.

He acknowledged the Department of Justice has ordered BP to preserve a cross section of the pipeline for inspection.