BP shuts down Alaska field to prevent spill
Monday, August 7, 2006, 10:54
The move, which will take 400,000 barrels of oil a day off the market, sent the price of a barrel of New York Mercantile Exchange crude up 1.6% to $75.95 on Monday. BP Plc, the world's second-largest publicly traded oil company, is shutting Alaska's Prudhoe Bay oil field, the largest in the US, because of pipeline corrosion, cutting supplies to West Coast refineries and raising new criticisms of the company's safety record. Oil rose up to 2.4% and shares in London-based BP slipped as much as 2.3%. Shareholders in the field, accounting for 8% of US output, include Exxon Mobil Corp., ConocoPhillips and Chevron Corp. BP doesn't know when the pipeline will be repaired, spokesman Ronnie Chappell said. BP faces grand jury probe after oil leaked from a Prudhoe Bay pipeline in March. „It's just another long line of bad news for BP,” said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. „They had the Texas City refinery fire last year, followed by the LPG trading scandal and now Prudhoe Bay.”
Crude oil for September delivery rose as much as $1.79 to $76.55 a barrel in after-hours trading on the Nymex, and traded at $76.33 at 4:02 p.m. Singapore time. Oil reached a record $78.40 a barrel on July 14. BP shares fell as much as 14.5 pence, or 2.3%, to 621.5 at 9:03 a.m. London time. Oil has gained 24% this year after militant attacks cut shipments from Nigeria and Iran's nuclear standoff with the US increased concern that Middle East supplies will be disrupted. The shutdowns, coupled with depletion at some of the world's largest fields including Mexico's Cantarell, are keeping prices near records. „Prudhoe Bay is a sizeable flow and is key to the US market,” said Nunan. „It should have a fairly big effect.” Some 400,000 barrels a day of production is being shut, BP's Chappell said. A pipeline that leaked four to five barrels of oil was shut down at 6:30 a.m. Alaskan time Sunday, BP said in a statement. BP owns 26.36% of the Prudhoe Bay field. Alaska provides about 10% of BP's worldwide oil production.
Exxon Mobil, the largest public oil company in the world, owns about 36% of Prudhoe Bay, according to its Web site. Houston, Texas-based ConocoPhillips, the No. 3 US oil company, owns 36.1% of Prudhoe Bay. San Ramon, California-based Chevron, the No. 2 US oil company, owns about 1.2% and Denver, Colorado-based and Forest Oil Corp. 0.02%. 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% of the system.
The pipeline leak and the discovery of corrosion „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 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 System, only affects Prudhoe Bay and not other fields in the remote region, Chappell said. The field's output peaked in 1989 at 1.5 million barrels a day and has been declining since, he said.
The US government in July issued a warning to BP over its Alaskan business, saying it has „significant concern” about the company's efforts to meet regulations imposed on the Alaskan unit following the March oil leak, the Financial Times said July 27. BP's March oil leak in Alaska, of 270,000 gallons, was caused by internal pipeline corrosion, spilling oil over 1.9 acres of tundra and frozen lake surface. The worst oil spill in US history was the 1989 grounding of the Exxon Valdez tanker in Alaska's Prince William Sound, when 11 million gallons of crude were dumped. 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. (Bloomberg, Financial Times)