Major Alaskan Oil Field Shutting Down

[Stylerod]

ANCHORAGE, Alaska (AP) - In a sudden blow to the nation's oil supply, half the production on Alaska's North Slope was being shut down Sunday after BP Exploration Alaska, Inc. discovered severe corrosion in a Prudhoe Bay oil transit line.

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.

Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production as of May 2006 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.

"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," BP America Chairman and President Bob Malone said in a statement.

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.

"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."

Malone said the field will not resume operating until the company and government regulators are satisfied it can run safely without threatening the environment.

Officials at BP, a unit of the London-based company BP PLC (BP), learned Friday that data from an internal sensing device found 16 anomalies in 12 locations in an oil transit line on the eastern side of the field. Follow-up inspections found "corrosion-related wall thinning appeared to exceed BP criteria for continued operation," the company said in a release.

Workers also found a small spill, estimated to be about 4 to 5 barrels. A barrel contains 42 gallons of crude oil. The spill has been contained and clean up efforts are under way, BP said. "Our production while all this is in place is going to be marginal," said Will Vandergriff, spokesman for Gov. Frank Murkowski. "That presents some technical problems because it's a high capacity line and it's meant to be filled."

Vandergriff said he did not know exactly what potential problems a sudden drop in oil flow might cause the pipeline. Alyeska Pipeline Co. officials could not immediately be reached for comment.

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

According to forecast figures from the Alaska Department of Revenue, a 400,000 barrels of oil per day production drop would mean approximately $4.6 million per day lost to the state. That is money going to both the state treasury and the state's oil wealth savings account, the Alaska Permanent Fund.

"That starts adding up to big bucks in a hurry," said House Finance Co-Chairman Mike Chenault, R-Nikiski. "It could start having a disastrous effect on the state as early as today."

BP said it was sending additional resources from across the state and North America to hasten the inspection of the remaining transit lines. About 40 percent of the lines have been inspected.

BP previously said it would replace a 3-mile segment of pipeline following inspections conducted after up to 267,000 gallons of oil spilled onto the frozen ground about 250 miles above the Arctic Circle in March.

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.

How does a pipe carrying oil get corroded. Isn't oil normally used to prevent that

Anyway. This sucks....

[Concept]

I predict a

............................. /\
............................../ \
___________________/ \_______________

Spike.

[motivez]

That's odd, I wonder how it got corroded? Could the cold / wind do something like that?

[DosEquis]

welp i need to get gas tomorrow anyway

[Scrum]

Originally Posted by motivez

That's odd, I wonder how it got corroded? Could the cold / wind do something like that?

Maybe it's near the ocean or other saltwater? Sea air would certainly do it.

[archangel003]

I only buy domestic gasoline, too.

So BP, Amoco, and Marathon are all going to go up.

I'll be damned if I stoop to buying Middle Eastern gasoline though.

Oh well, 31 mpg ftw.

[Nonphixion]

Major Oil Spill Disclosed In Alaska, Oil Spill Is Largest Ever On North Slope - CBS News

The first spill happened in Prudhoe Bay in 13 March 2006.

[DosEquis]

Just on MSNBC it could take "months" to fix the section of pipeline.

[motivez]

Originally Posted by DosEquis

Just on MSNBC it could take "months" to fix the section of pipeline.

Great..

Was there any news as to what actually caused this?

[DosEquis]

Originally Posted by motivez

Great..

Was there any news as to what actually caused this?

I didn't see anything about an actual cause. They picked up a leak and decided they needed to replace 16 miles of pipeline.

[willis]

Originally Posted by motivez

Great..

Was there any news as to what actually caused this?

not thoroughly checking the pipeline since 1992..

apparently, guessing it's good enough doesn't make it so

My Way News - BP: Pipeline Closing May Last for Months

Originally Posted by article

ANCHORAGE, Alaska (AP) - BP PLC (BP) 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. (XOM), 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 (BPT), which derives revenue from royalties of BP's Prudhoe Bay oil, fell $9.12, or 10.4 percent, to $78.77 on the NYSE.

[motivez]

Great.

And these people want to drill in ANWR? Where conditions to get vehicles up there are probably much more limited than this place?

This is why I'm glad Democrats have been against allowing drilling. Without seriously tight controls and maint standards put in place, we should be focusing on alternatives and effeciency.

[DosEquis]

One interesting thing I see...

No gasoline shortages seen
U.S. consumers will not face shortages of gasoline and other petroleum products because of the BP shutdown, the government’s top energy forecasting agency said on Monday.

“It certainly isn’t going to create any shortages in gasoline, diesel fuel and other petroleum products,” Tancred Lidderdale, an analyst with the federal Energy Information Administration, told Reuters.

Lidderdale said West Coast refiners, where most of Alaska’s crude oil is shipped, have plenty of oil supplies as crude inventories in the region are “above average.”

BP's 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.


To me it looks like the only other thing "above average" is the price we pay. Isn't this shit supposed to be cheaper if they have plenty of supply?

[DosEquis]

Originally Posted by willis

not thoroughly checking the pipeline since 1992..

apparently, guessing it's good enough doesn't make it so

My Way News - BP: Pipeline Closing May Last for Months

I guess they haven't had enough profit left over for maintenance.

[6SpeedTA95]

It gets corroded because in with the oil there's all kinds of other things like natural gas, H2S, water, there's a host of particulates that can cause corrosion in the pipeline.

[willis]

Originally Posted by DosEquis

I guess they haven't had enough profit left over for maintenance.

obviously the case..

[willis]

Originally Posted by DosEquis

One interesting thing I see...

No gasoline shortages seen
U.S. consumers will not face shortages of gasoline and other petroleum products because of the BP shutdown, the government’s top energy forecasting agency said on Monday.

“It certainly isn’t going to create any shortages in gasoline, diesel fuel and other petroleum products,” Tancred Lidderdale, an analyst with the federal Energy Information Administration, told Reuters.

Lidderdale said West Coast refiners, where most of Alaska’s crude oil is shipped, have plenty of oil supplies as crude inventories in the region are “above average.”

BP's 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.


To me it looks like the only other thing "above average" is the price we pay. Isn't this shit supposed to be cheaper if they have plenty of supply?

and yet, all the articles i've seen are calling for us to watch for around a 5 cent jump...

such bullshit

[6SpeedTA95]

Originally Posted by DosEquis

I guess they haven't had enough profit left over for maintenance.

Right because shutting in the pipeline is popular

[6SpeedTA95]

Originally Posted by motivez

Great.

And these people want to drill in ANWR? Where conditions to get vehicles up there are probably much more limited than this place?

This is why I'm glad Democrats have been against allowing drilling. Without seriously tight controls and maint standards put in place, we should be focusing on alternatives and effeciency.

What? Why do you want to restirct anwr drilling? because they found a problem and fixed it before there was a major spill? Because obviously the checks in the pipeline unocvered a problem?