BP Shuts Prudhoe Bay Field; 8 Percent of U.S. Output

[Jag]

Aug. 7 (Bloomberg) -- BP Plc said it's shutting the Prudhoe Bay oil field in Alaska, accounting for 8 percent of U.S. output, because of corrosion in a pipeline.

The shutdown of about 400,000 barrels a day at the largest U.S. field will take days to complete and the company doesn't know when production will resume, field operator BP Exploration Alaska Inc. said in a statement through PRNewswire. The pipeline was shut down at 6:30 a.m. Alaskan time Sunday, it said. Oil prices rose as much as 0.3 percent.

The world's second-largest publicly traded oil company is under a U.S. grand jury investigation over an oil spill in Alaska. About 6,400 barrels of oil leaked from a Prudhoe Bay pipeline in March, almost a year after an explosion at a Texas refinery killed 15 workers and led to the biggest fine by U.S. refinery safety regulators.
The discovery of the corrosion and a leak of four to five barrels ``have called into question the condition of the oil transit lines at Prudhoe Bay,'' Bob Malone, BP America President, said in the statement. ``We will not resume operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment.''

BP owns 26.36 percent of the Prudhoe Bay field. Other shareholders include Exxon Mobil Corp., ConocoPhillips and Chevron Corp. Alaska provides about 10 percent of BP's worldwide oil production.

Crude-oil production shutdowns in Nigeria earlier this year and concerns about potential supply disruptions in Iran and elsewhere in the Middle East helped push oil prices to a record this year. Oil reached $78.40 a barrel on July 14. It rose as much as 21 cents to $74.97 a barrel in after-hours trading on the New York Mercantile Exchange at 9:41 a.m. Singapore time.

Pipeline Inspections
BP's decision to close down the Prudhoe Bay field follows the analysis of data from inspections along the pipeline system in late July, which revealed 16 anomalies in 12 locations in an oil line on the eastern side of the field, BP said. BP operates 22 miles of oil transit lines at Prudhoe Bay and has inspected about 40 percent of the system.

BP is getting extra resources from across Alaska and North America to speed the inspection of the remaining oil transit lines at the field, it said.

The shutdown of the line, which supplies the Trans-Alaska Pipeline, only affects Prudhoe Bay and not other fields in the remote region, Ronnie Chappell, a BP spokesman, said in a telephone interview. The field's output peaked in 1989 at 1.5 million barrels a day and has been declining since, he said.

BP agreed to inspect oil feeder lines at Prudhoe Bay after the March spill, Chappell said. This is the first time the field has been shut down because of corrosion in a feeder line, he said.

``We need to understand why the corrosion is as severe as it is,'' Chappell said. ``We do not have a firm re-start date at this time.''

http://www.bloomberg.com/apps/news?p...top_world_news

Jag

[Malsua]

$4/gallon Gas, coming right up.

-Mal

[SAdams]

$4/gallon Gas, coming right up.

-Mal

Crap.

[falcon]

From a Quality Control stand point where is BP's Preventative Maintenance program? The way the article is written seems like BP had to be directed to preform these inspection, based on an earlier spill. A good Preventative Maintenance program could have resolved these issues. What kind of Management is running BP? BP probably did away with the program to save costs overruns bad idea.

BP agreed to inspect oil feeder lines at Prudhoe Bay after the March spill, Chappell said. This is the first time the field has been shut down because of corrosion in a feeder line, he said.

[Malsua]

And the fun just keeps on coming. -Mal -------- BP: Pipeline Closing May Last for Months Aug 07 3:38 PM US/Eastern Email this story

By MARY PEMBERTON
Associated Press Writer

ANCHORAGE, Alaska

BP PLC said Monday it will replace 73 percent of the pipelines from the nation's largest oil field and that production could be closed for weeks or months, crimping the nation's oil supplies at a time of peak demand.
BP, the world's second-largest oil company, began shutting down the pipelines on Monday and said it would replace 16 miles of the 22 miles of transit pipeline it operates in the Prudhoe Bay field following a leak discovered Sunday.

Company officials told a news conference they did not immediately know how much it would cost to replace the lines. They will continue to keep the oil field closed and bring parts back into service once it's safe to do so.
Once complete, the shutdown will cut production by 400,000 barrels a day, about 2.6 percent of supply including imports, according to data from the U.S. Energy Information Administration. The news drove oil prices up by $2 a barrel and boosted gasoline prices.
"BP deeply regrets it has been necessary for us to take this drastic action," said Bob Malone, chairman of BP America.
On Monday, BP began shutting down the entire Prudhoe Bay field, 650 miles north of Anchorage, to further inspect the lines for corrosion.
BP discovered corrosion in the transit lines only after the Department of Transportation ordered their inspection following a 270,000 gallon spill in March at another section of the field.
Transit lines move the oil to flow stations for transport down the trans-Alaska pipeline for shipment 800 miles south to Valdez, where it's shipped to the Lower 48 aboard tankers.
BP officials said the line where the leak was found was last checked for weakness using a technology called a "smart pig" in which a device is sent down the tubes to assess pipeline integrity in 1992.
BP had not done a routine maintenance "pigging" on its transit lines because they didn't think it was necessary because those lines carry clean crude from which water was removed.
Steve Marshall, president of BP Alaska, said the company believed ultrasonic testing of pipeline wall thickness was an acceptable substitute on those lines.
In hindsight, he said, that has proven not to be sufficient.
"Clearly, we are already in the process of adjusting considerably our corrosion program," Marshall said, adding that the company will significantly increase its maintenance and surveillance of the transit lines both now and when they are replaced. The company is spending $72 million this year to inhibit corrosion, up from $60 million last year.
The aging pipeline system on the North Slope has been fraught with problems lately. BP, which posted a net profit of $7.3 billion for the three months ending June 30, operates the Prudhoe Bay field.
In March, BP was blamed for the rupture of a pipeline at the same Prudhoe Bay field, leading to an extension of a criminal investigation into the company's management of its Alaskan operations.
Steve Marshall, president of BP Exploration Alaska Inc., 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.
BP also said Sunday that workers found a small spill of about 4 to 5 barrels, which has been contained and is being cleaned up.
The news sent the price of light, sweet crude oil up $2.50 to $77.30 a barrel in early afternoon trading Monday on the New York Mercantile Exchange Monday.
The average U.S. retail price of a gallon of unleaded, regular gasoline was $3.036 on Monday _ near its all-time high of $3.057, reached Sept. 5 after Hurricane Katrina hit the Gulf Coast.
Gasoline futures also rose, indicating that the market expects prices at the pump to rise more.
Because of the disruption of supplies, the Energy Department is prepared to provide oil from the government's emergency supplies if a refinery requests it. Spokesman Craig Stevens said the department will be in contact with BP and West Coast refiners later Monday to assess the situation.
The reserve has about 700 million barrels in storage on the Gulf Coast to be used in case of a serious supply disruption. The Energy Department in the past has lent SPR oil to refineries when there were disruptions because of pipeline or other problems.
"If there is a request for oil we'll certainly take a serious look at that," he said.
Bill Hedges, BP's technical expert on corrosion, said the Prudhoe Bay pipelines were initially designed to last 25 years, but have now lasted 29 years, with many of the lines in "excellent condition."
BP's anticorrison program is intended prolong the life of the oil field another 50 years so that the infrastructure can be used to bring natural gas to U.S. markets. The company's reliance on ultrasonic technology will have to be re-evaluated, he said.
"My assumption is that we didn't do it in the right spots," he said.
BP, along with oil giants ConocoPhillips and Exxon Mobil Corp., are in negotiations with the state to build a $25 billion natural gas pipeline to Canada to ship the 35 trillion cubic feet of known natural gas reserves on the North Slope.
The troubles at the Alaskan oil field add to other problems for BP in the United States, where the company is the largest oil producer, following an explosion at its Texas City refinery that killed 15 workers in March 2005 and a trading scandal.
The shutdown comes six months after the North Slope's biggest ever oil spill was discovered on a Prudhoe Bay transit line. 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.
BP has a 26 percent stake in the Prudhoe Bay field, meaning its own production would be cut by 100,000 barrels a day, or around 2.5 percent of the company's worldwide production, said spokesman David Nicholas. He declined to provide any forecast on the impact of the shutdown on earnings.
U.S. shares of BP PLC fell $1.19, or 1.6 percent, to $71.35 in morning trading on the New York Stock Exchange. Shares of BP Prudhoe Bay Royalty Trust, which derives revenue from royalties of BP's Prudhoe Bay oil, fell $9.12, or 10.4 percent, to $78.77 on the NYSE.
___
AP Writers Matt Volz in Juneau, Alaska, and Jane Wardell in London contributed to this report.

[Brian Baldwin]

I want to see the damage before I believe a word these dorks say. Seems just a little too fiscally convienent if you ask me.

[Malsua]

Fiscally convenient for sure. If they ask for gov't assistance, it's a set up. Keep watching. If one of these nozzles says "we could speed up the process if the gov't will waive certain regulations and assist in key infrastructure upgrades" it's code for payola.

I know for a fact, that in business, specially very big business that things are often left to become an emergency because it draws attention to it and there are public funds made available to fix it. The power companies do this ALL the time in the NYC Metro area. Everytime there's a storm, they wait intil the DPW comes in and clears the trees and debris, ostensibly the power company's job.

It wouldn't suprise me in the least if someone in power had an inkling that something would go wrong here and they basically sat on any repairs just so that it will restrict supply and they dip into the gov't till to fix it.

-Mal

[falcon]

Well just ask the question; BP where is your Preventative Maintenance Program? Within all Preventative Maintenance Program there is a repair process that takes place, it looks like BP has no type of program.

It wouldn't suprise me in the least if someone in power had an inkling that something would go wrong here and they basically sat on any repairs just so that it will restrict supply and they dip into the gov't till to fix it.