BP unsure how long Prudhoe Bay oil field to be shut down

By Paula Dittrick
Senior Staff Writer

HOUSTON, Aug. 7 -- BP Exploration (Alaska) Inc. said it's unsure how long Prudhoe Bay oil field might be shut down pending replacement of an estimated 16 miles of a severely corroded oil transit line that resulted in a small spill.

The field will take days to shut down, BP executives said during an Aug. 7 conference call with reporters, adding that the move will reduce Alaska North Slope oil production by 400,000 b/d.

BP is working with state and federal pipeline authorities to determine if it might be possible to continue operating portions of the field, BP America Chairman and Pres. Bob Malone said. Meanwhile, engineers are studying how to replace much of the transit line, adding they had no cost estimate yet. They also said they were studying how to obtain the pipe.

Upon the news, the price of crude oil began rising on the New York Mercantile Exchange, and analysts questioned how California refineries would make up for the lost ANS crude production.

Corrosion
BP said its analysis of smart pig run data from late July showed 16 anomalies in 12 locations in a pipeline on the field's east side, prompting inspections of anomalies where corrosion-related wall thinning appeared severe.

It was during these inspections that BP discovered a leak and a 4-5 bbl spill, which has been contained. Flow Station 2 was shut down Aug. 6, and spill cleanup was initiated.

Malone said the leak and smart pig run called into question the condition of the oil transit lines at Prudhoe Bay.

"BP deeply regrets that it has been necessary to take this action," Malone said during a conference call, vowing that the company will use all available human and financial resources to resolve the problem as soon as possible.

He declined to suggest when Prudhoe Bay field activities might be resumed.

"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," Malone said.

BP is working to speed inspection of its oil pipeline at Prudhoe Bay. Smart pigging inspection had been completed over about 40% of the route as of early Aug. 7.

BP Alaska Pres. Steven Marshall reported a wall thickness loss of more than 70% in the 30 in. pipeline. He said the corrosion appears to be of a different type than the corrosion that was responsible for a Mar. 2 leak in Prudhoe Bay Operating Area pipelines.

"Clearly, there is another corrosion mechanism occurring here," Marshall said.

Missed deadlines
Last month, the US Pipeline and Hazardous Materials Safety Administration (PHMSA) increased pressure on BP to improve its North Slope operations after the company missed deadlines to repair and clean leaking Prudhoe Bay Operating Area pipelines (OGJ Online, July 31, 2006).

Thomas J. Barrett, who on June 16 became the Department of Transportation regulatory agency's director, said PHMSA insists that BP begin draining 17,000 bbl of oil from three low-stress oil pipelines in the operating area by Aug. 22. BP said it would meet the deadline.

PHMSA on July 20 ordered BP Alaska to provide specific information and plans for handling accumulated solids in the pipelines. The order followed BP's failure to meet earlier deadlines under a Mar. 15 Corrective Action Order PHMSA issued after the Mar. 2 leak.

About 6,000 bbl of crude oil is believed to have leaked from the pipeline, operating at 87 psi, as a result of corrosion at a low point of the system at a caribou crossing (OGJ, Mar. 27, 2006, Newsletter). BP Alaska immediately took out of service the pipeline section that leaked.

West Coast refiners
Meanwhile, US Department of Energy spokesman Craig Stevens said that DOE would consider loaning Strategic Petroleum Reserve oil to West Coast refiners if one of them were to make such a request.

DOE staff members were talking with BP and representatives from affected refiners, Stevens said.

Analyst Olivier Jakob, managing director of Petromatrix GMBH, Zug, Switzerland, noted an SPR release to West Coast refiners would be difficult to implement. SPR oil is stored along the US Gulf of Mexico coast, and there is no pipeline link to California.

"The only feasible solution would be for the SPR to release some stocks to gulf refiners that would then redirect cargoes to the West Coast," Jakob said. "But this is also unlikely to be a solution as one would need a Panama Canal-size cargo, and it will still take 21 days to reach the West Coast."

He said the SPR would be of no use in this situation "apart from trying to calm the market down through reassuring statements."

Refiners depending upon ANS crude reported no immediate short-term effects.

A Valero Energy Corp. spokesman said, "It is too early to know if there will be any long-term impact to our operations as a result of this outage. However, short-term, we are able to substitute similar crude oils and do not anticipate any near-term operational impacts."

Shell Oil Products US reported that the 148,600 b/cd Anacortes refinery in Puget Sound in Washington state uses ANS crude. Shell spokesman Stan Mays said that refinery already has sufficient crude en route for near-term operations.

Shell is studying alternate crude supply sources, Mays said, although he declined to elaborate.

Contact Paula Dittrick at [email protected].