Huge Alaskan Oil Field Shutting Down
BP Finds Corrosion and Spill; 400,000 Barrels a Day to Be Halted
By MARY PEMBERTON, AP
ANCHORAGE, Alaska (Aug. 7) - Oil company BP scrambled Monday to assess suspected pipeline corrosion that will shut shipments from the nation's biggest oil field, removing about 8 percent of daily U.S. crude production and driving oil prices sharply higher.
The Prudhoe Bay oil field, source of the Trans-Alaska Pipeline, represents about eight percent of U.S. oil production.
Major Alaskan Oil Field Shutting Down
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BP, which is already facing a criminal investigation over a large spill in March at the same Prudhoe Bay oil field, 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 oil field 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.
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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 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.
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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.
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.
BP shares dropped 2 percent to 623 pence ($11.89) on the London Stock Exchange.
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.
AP Writers Matt Volz in Juneau, Alaska, and Jane Wardell in London contributed to this report.
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...make everything 100% safer and more or less foolproof.
These problems should never happen. So much for using advanced knowledge in making our planet a better place.
Too bad making a Dollar $$$$ is more important than our enviorment and health. Everything is focused on the dollar.
The fact is, we are getting screwed, blued and tatooed over the lies from big business and the CONTROLLERS... Care to see gas prices of $5.00 and up per gallon?
No big deal with the pipeline, its inspected daily with a "PIG" and the corrosion is monitored and maintance scheduled. Yes, I had another life o nce other than dealing with dead people and spastic idiots.
You're talking like the typical tree hugging Liberal. What exactly do you know about oilfields & pipelines?
This is not the typical maintenence thing this time. Read the article. The pipes are getting old! They're from what the 70's?
I know you have an extensive background in oil up there and I respect that but this one's different.
Oh well, just another excuse for the speculators to make a bundle and raise gas prices even if only 8 percent of the refined oil we use is from Alaska. I'm looking for a 10 to 20 cents spike in gas prices per gallon.
not quite, but you're on the right track. A lot of those pipes are reaching the end of their designed lifetime. Things wear out. Gotta be replaced...
It is not wrong to care about our world that we live in and it is not wrong to speak up and raise a stink about things that our know-it-all bureaucrats do. We need to make them listen to us and stop chasing fame and fortune at the cost of the public health, etc and our environment.
It would be dumb to call me a tree-hugging liberal...that hurts! LOL
Not bragging just fact: I hold three different doctoral degrees in: Physics, Education, Earth Sciences. I also hold several master degrees in various fields of interest and endeavors. Now since I said that, I am sure people are going to start the bashing and BS tirade... That's ok. I have been known to be wrathful beyond belief when needed.
I mess around on these forums and learn a lot about the social norms of present day people. I am also a taxidermist and a Veteran. Matter of fact, just got blood drawn and urinalysis this morning at the VA clinic. I don't care much for needles.
We have great technology available to us. It really ticks me off to see such antiquated methods used just to keep the status quo. No sense going into detail.
If I am tree stand hunting, don't be surprised if you see me cutting down a hell of a lot of trees and brush for a clear shooting lane.
And I WILL kill something and eat it if I am hungry. Hell, I hunt anyway. Better than hunting humans...well, most of the time! LMAO
BS or whatever. I see nothing there that says you know anything about pipelines & oilfields. Or anything about what goes on there other than what the reporters (that also know nothing) tell you. Do you know how they knew oil is there to begin with? It bubbles out of the ground. It has for who knows how long. You know who cleans that up? NOBODY... Which antiquated methods do you mean. Until they figure out a better way to transport oil besides a pipe, they'll keep using it.
I do not work on any pipeline. Surfice to say, we have materials that will last for hundreds of years and be a hell of a lot safer. Most are not used because the big companies wwant to save money. GEEEEEEEZE! Don't get so upset.
Hell, its your area. I just don't like having to pay more and more for things we have to use because the companies ALLOW certain matters to fester and say, oh well, it is to be expected with this material." Thats all.
Go ahead and send me some information if you like. I have no beef with you or anyone else. BTW, I would much rather eat venison than beef anyhow. LOL
Yes, there are better materials. Most of that infrastructure was put in during the late 70's, and now it's way past the end of its expected lifetime. And the better materials aren't necessarily available on the massive scale we're talking about. But it is used on new construction. When your 1975 truck wears out, you generally don't replace it with another 1975 truck. I don't anyway. Can't speak for you...
I just try to find replacement parts...LOL Sorta like the old truckers never die; they just get a new Peterbuilt! LOL
Well, if the oil companies or whatever wanted to really put people to work, it would be great to update all of those pipes. Maybe we should just beam the oil to its locations..LMAO (Star Trek)
Yes, things are so expensive now a days. Don't understand how a lot of people can afford all that they do. New home, new car, new furniture, new pool, big vacations, second and third homes. Damn! A lot of people must really be in debt! What a headache to have to make payments each month!
But, because of the unique issues with the terrain, nobody really knew what the lifespan would actually be. It's just cheaper to repair the existing stuff vs. the cost of replacement and the downtime. But, it's not like they don't have the money to invest in a new pipeline with what they've made off of that oil field. Not to mention the future profits. Besides the terrain challenges, you have the first third of the pipeline raised because of the permafrost. The heat generated from the oil creates a lot of issues with condensation and premature failure due to rust. Certainly a S.S. pipe system would be great, but too expensive. Clad Pipe - a S.S. coated carbon steel pipe would do the trick. But this also is much more expensive than a normal C.S. pipe. I think it's a matter of the "pay me now or pay me later" philosophy. They'll continue with the band-aids until the band-aids get too expensive. By then, there may not be enough reserves to necessitate a more expensive material than what's currently being used. I believe the original lifespan was estimated at 25-30 years. Pretty good original estimate...
They planned well for the corrosion on the outside. And you can peal the jacketing off the insulation and see that. Providing you don't have to dig it up 1st. The problem they are faced with is corrosion from the inside out.
You'd think the oil itself would provide plenty of protection from rust on the inside, but apparently not.
corrosion doesn't have to be "rust". There are many forms of corrosion, another being electrolosis. And when that oil comes out of the ground, there's water mixed with it.