http://news.yahoo.com/s/ap/20060807/...field_shutdown

BP shuts down major Alaskan oil field

By MARY PEMBERTON, Associated Press Writer




ANCHORAGE, Alaska - Oil giant BP has indefinitely shut down the nation's biggest oilfield after finding a pipeline leak, removing about 8 percent of U.S. oil production and stoking fears that already high gas prices will shoot up further.


Steve Marshall, president of BP Exploration Alaska, Inc. said Sunday night that the eastern side of Prudhoe Bay 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."

Light, sweet crude for September delivery was up $1.23 to $75.99 a barrel in mid-afternoon Asian electronic trading Monday on the New York Mercantile Exchange.

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 officials said they didn't know how long the Prudhoe Bay field would be off line. "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.

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.

While BP suspects corrosion in both damaged lines, they can't say for sure until further tests are complete. Workers also found a small spill, estimated to be about 4 to 5 barrels, which has been contained and clean up efforts are under way, BP said.

BP, a unit of the London-based company BP PLC, 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.

Alaska House Speaker John Harris said it was admirable that BP took immediate action, although it's sure to hurt state coffers. "This state cannot afford to have another Exxon Valdez," said Harris, R-Valdez.

The Exxon Valdez tanker emptied 11 million gallons of crude oil into Prince William Sound in 1989, killing hundreds of thousands of birds and marine animals and soiling more than 1,200 miles of rocky beach in nation's largest oil spill.

___

Associated Press Writer Matt Volz in Juneau contributed to this report

 

Yes, but didnt most of this go to Japan in the past? This means Japan will be getting less now.

Sometimes I do believe these prices are part of a con, though. So much is "spin" nowadays. A hiccup happens somewhere and the speculators drive the prices up. From an Australian who sent me this.

Makes you wonder.

 

And if you mention the $10 billion quarterly profit, they get mad and say that they are just earning a buck and not gouging. And if you talk alternative fuels, such as ethanol (Brazil has done it for 10years), they will resist distrubution. Who is going to start a brand new gas station just for ethanol when the ones already there won't do it.

 

They arent gouging anyone. If you dont like the cost, ride a bike.

 

Try not to get too political on this one. Supply and demand in effect here.

Still, one wonders. If there isn't going to be a big hurricane or other event to jack up prices, shutting down some wells will do the trick. Surely BP was running smart pigs through their pipelines - you don't just 'discover' your pipeline is corroded overnight.

Interestingly, my new Explorer's gas cap says "Ford recommends BP fuel." Guess it will have to run on somebody else's fuel.

 

The report said that they found "losses in wall thickness of between 70 and 81 percent" and that repairs were needed for anything more than 80 %. Depending on how the law reads, BP isn't going to do any repairs until they find something over 80, or their estimated model of the pipeline shows something over 80 in the time between their tests.
It is very possible that their model was off, and finding an actual jump of say 5% instead of their estimated 3%, which could set them back say, 6 months. It is alot easier to repair certain sections of pipeline, rather than shut down the entire operation and try to do it all at once, but they have to go by what the law says, and they definitely don't want to risk blowing out a line and having a major leak.
What they also might be looking at, is where the areas with the reduced wall thickness are. If there's one section of pipe that has more corrosion than another, they're going to try to find a way too keep it from happening. Maybe not necessary for the environment, but so they won't have to replace it again as soon.
There are a ton of reasons why they have to repair the pipeline, and probably a few good ones why they are just shutting the entire works down. I don't think the government really had much to do with them shutting down, but they'll probably feed off the after-effect.

 

it would be real funny if the price hardly jumped due to this supply disruption, but yet we will always see it jump on a "just in case" basis's.

which reminds me, i am still waiting for our pre-hurricane level price to come back, what ever happened to that?

 

last week tropical storm Chris was supposed to become a hurricane so the prices jumped up, ofcourse it did not become a hurricane, did the prices jump down?

 

I'm still waiting for McDonalds to raise the price of their hamburger cause of mad cow disease, or KFC to raise their price cause of west nile or something.

Isn't this the same thing? why can the oil guys change their price everyday and the other guys don't.

 

The story over the news here is the oil from that area goes to the U.S. northwest and California. There is currently a 5 year supply in storage.

 

Well....they'll jack the prices up to cover pipeline repairs. But remember how every oil company "had to" raise their prices to pay for the Exxon Valdez cleanup? Imagine what we'd get stuck with if the pipeline broke.

 

forbid they dip into their profit to actually fix something beforehand.

 

A little duct tape here, a little RTV there and we'll be good to go for a few more months. Who plans past that nowadays?

 

and i am still wondering why its legal for a foriegn holding company to operate such an economic and security important related item on such a scale on U.S. soil. to me it should be nationalized if anything.

 

Cha-Ching !

I knew it wouldn't take long.

http://money.canoe.ca/News/Economy/2...566616-ap.html