Oil Prices to Spike, BP Oil Field to Shut Down- Prudhoe

This is a conversation that was in our forum moved here to the blog.

British Petroleum are inspecting a possible pipeline corrosion that will shut shipments from the biggest oilfield in the US, removing about 8 percent of daily U.S. crude production and driving oil prices sharply higher.

BP, which is already facing a criminal investigation over a large spill in March at the same Prudhoe Bay oilfield, 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. Apparently the eastern side of the Prudhoe Bay oilfield would be shut down first, an operation anticipated to take 24 to 36 hours. BP 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.

Tests conducted showed 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 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. The only saving grace for the whole situation for consumers is that curreny oil inventories are generally high and therefore impact may be minimal

Barry

Aug 7, 2006, 10:46 AM

Post #1 of 24 (1976 views)

Re: [Barry] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

We reported first about the pipleline problems and now some good news. BP said they may be able to keep some of their Prudhoe Bay pipelines open. Severe corrosion on a pipeline caused the closure.

U.S. Energy Secretary Sam Bodman said Tuesday that as much as half of production could be kept online at the Prudhoe Bay site. U.S. officials also confirmed that Saudi Arabia and Mexico had agreed to help out with any shortfall.The Energy Information Administration (EIA) said in its short-term energy outlook that it expects Alaskan crude oil production to return gradually to full production by February, losing about 1.2 million barrels of oil in the process.

Before closing at $76.31, light sweet crude for September delivery peaked as high as $77.45 Tuesday on the New York Mercantile Exchange.

BP must replace almost 26 kilometres of pipeline from the oil field, which is located more than 1,000 kilometres north of Anchorage in Alaska’s North Slope region.

Alaska usually supplies 800,000 barrels of oil a day to the West Coast refineries, or 30 per cent of all the oil processed daily in that region, the EIA said in its outlook.

U.S. crude inventories are at a 5-year high with about 334 million barrels, but the spare capacity of Organization of Petroleum Exporting Countries (OPEC) is limited at about 1.1 million to 1.3 million barrels a day, the EIA estimated.

The closure of the Alaskan oil field comes just months after the bigger pipeline leaked some 267,000 US gallons of crude oil onto the Arctic tundra in March, a spill which is now under criminal investigation.

Barry

Mr. Do It All

Aug 9, 2006, 1:09 AM

Post #2 of 24 (1971 views)

Re: [Barry] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

interesting, check out this article on the timing of this repair work by the american journalist greg palast (writing in the uk guardian)

http://www.gregpalast.com/british-petroleums-smart-pig#more-1474

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 9, 2006, 11:00 AM

Post #3 of 24 (1970 views)

Re: [MarkTwain] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

Nice find. I believe it all, to an extent. i don’t doubt for a minute BP would go to those lenghts to boost their profits, and I’m certain they were fully aware of the corrosion for a long time. The question is, will the US government slap them on the wrist, turn the blind eye, or take ppl to jail. Given the nature of the industry and the importance to the American pshyche I’ll vote for nothing.

econmod

Aug 10, 2006, 11:31 AM

Re: [econmod] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

The governor of Alaska has questioned whether BP misled it over the condition of its pipelines, given the recent leak from the Prudhoe Bay oilfield. The oilfield accounts for 8% of US domestic production, producing 400,000 barrels a day.

The shutdown at the site is expected to cost Alaska $6.4m a day in tax revenues and this has prompted a government state-wide hiring freeze.

He said BP would be “held responsible” for its earlier management of the site. Haha, we’ll see about that considering numerous people within the Alaskan government were likely tipped off long ago about the state of the BP’s pipes.

The indefinite shutdown of the oilfield comes at a time when oil markets are already jittery, with the conflict in Lebanon keeping prices close to record highs. BP has said it will replace 16 miles of pipeline at the site after corrosion was discovered on an oil transit line.

This followed a small spill from the pipeline in which an estimated four to five barrels were lost. (I’d like to see a picture of the 4-5 barrels….)

BP is already facing a criminal investigation after a leak from a stretch of pipeline on the site earlier this year resulted in the loss of 267,000 gallons of oil.

Finance

Aug 10, 2006, 11:53 AM

Re: [Financemod] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

there is an interview with the main whistle blower on this BP incident here (you can read transcript, listen an audio version or watch the video)

http://www.democracynow.org/…sid=06/08/10/1339232

it seems to me from this interview that BP are more guilty of deliberate cost cutting than deliberate profiteering (and some very wrong attempts to discredit and investigate their critics and own employees)

One could say that given the nature of the oil business BP face little disincentive to keep a tight ship, so the geopolitics/economics definately play a part. (not enough incentive in the system to keep up maintenence) but these geopolitical/economic issues are more of a background, it seems unlikely this was a long term economic strategy as some are suggesting.

This does not mean that their timing was not chosen to maximize profits, just that it was unlikely to be a long term aim, this timing issue was more of an attempt at damage limitation possibly, or geopolitical opportunism, i.e. do it now while this lebanon thing is on rather than wait and see if it calms down.(there are PR benefits to this strategy also, plenty of distractions going on and other things to put on the front page etc)

This is all speculation of course, we cannot know about their motives, however it does seem clear from this info about their lax maintence regime that new legislation or some action should be taken by government to improve standards, i doubt this will happen, or it if does it will be a compromise deal, especially as so many in the u.s. admin are into big oil, if the democrats get in at the next election the chance of new legislation will increase. (my opinion)

it doesnt look like the volatility in the oil market is going to reduce any time soon.

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Aug 11, 2006, 7:51 AM

Re: [MarkTwain] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

Don’t you just LOVE speculative markets! Some more from BP.com

BP Exploration Alaska said they will continue production of oil from the western side of the Prudhoe Bay oil field. Current production is 150,000 barrels per day, including natural gas liquids, and is expected to increase to 200,000 barrels per day as Gathering Center 1 ramps up to full production after completion of a planned maintenance

shutdown.

BP will complete the installation of 16 miles of new oil transit line at Prudhoe Bay by early next year. (congrats on the careful and forward looking planning) BP continues to ‘evaluate’ interim options for restoring production from the eastern side of the field, subject to the approval of the U.S. Department of Transportation, Pipeline and Hazardous Materials Safety Administration.

The decision to continue production from the western half of the field was taken after close consultation with federal and state regulatory agencies, review of more than 1400 ultrasonic inspections conducted on a key five-mile section of pipeline and a decision to begin round-the-clock visual and infrared surveillance of the line.

“Over the last five days we have doubled spot inspections over a key five-mile segment of the oil transit pipeline serving the western side of the field,” said BP America Chairman and President Bob Malone. “The results have been encouraging and have increased our confidence in the operational integrity of this pipeline. With greatly enhanced surveillance and response capability, I am confident we can continue to safely operate the line.”

BP will continue ultrasonic inspection of the western transit line andplans to complete additional inspections in coming weeks. The company will evaluate test results on a daily basis to determine if repairs are required or if continued operation of the line is appropriate. BP plans to run maintenance and smart pigs through the pipeline before the end of November after installing a pig launcher at Gathering Center 1.

The surveillance effort will include daily over-flights using forward looking infrared cameras, as well as the use of hand-held infrared cameras on the ground. The cameras are capable of detecting small leaks by sensing changes in pipeline surface temperatures. Two vehicles equipped with spill response equipment and carrying observers with infra-red leak detection equipment will patrol the line 24 hours a day. They will be teamed with pipeline walkers who will visually inspect the line 10 times a day.

Mod

Aug 15, 2006, 10:44 PM

BP Claims it was hurt by acquisitions [In reply to]

The next installment has arrived. BP PLC’s strategy of acquisition and higher profits “may” have lead to poor safety procedures. In essence, the company focussed on getting rich and in turn didn’t focus on maintaining their resources, or so the thought goes. Safetey meetings are usually resuffled to accommodate acquisition ones. I had no idea the same people did both jobs…..

econmod

Aug 16, 2006, 3:24 PM

Post #8 of 24 (1936 views)

BP Restores Half Prudhoe bay Production [In reply to]

BP has clamed ‘fears’ that Prudhoe production would decline to zero by saying half of its oil production has been restored. The west side is apparently fine and will be used to pump out the oil.

Mod

Webmaster / Moderator

Aug 21, 2006, 8:21 PM

Post #9 of 24 (1927 views)

Re: [Mod] BP Restores Half Prudhoe bay Production [In reply to]

talk about muddying the water, does anyone fancy producing a time line on this BP alaska pipeline issue? (including all the PR twists and turns)

I certainly dont. (lol)

PR smokescreen. (rather than say as little as possible, say as much as you can and bore people into not caring anymore)

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 22, 2006, 4:25 PM

Re: [MarkTwain] BP Restores Half Prudhoe bay Production [In reply to]

BP served with subpoena over Prudhoe Bay

BP and its partners have been served with a subpoena by the attorney general of Alaska forcing them to hold on to and “preserve” documentation connected with the corrosion of pipelines at Prudhoe Bay.

http://business.guardian.co.uk/story/0,,1855337,00.html

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 23, 2006, 9:43 AM

Post #11 of 24 (1916 views)

Re: [MarkTwain] BP Restores Half Prudhoe bay Production [In reply to]

Haha, do you think anybody will care at BP? Really, the firm gives billions to Alaskan revenue, there’ s no way anybody will go to jail, maybe a bit of a fine cause they stopped the flow for poor reasons.

Mod

Webmaster / Moderator

Aug 25, 2006, 11:01 AM

Post #12 of 24 (1907 views)

Re: [Mod] BP Restores Half Prudhoe bay Production [In reply to]

i dont expect anyone will serve time for this (and if they did it would be a scapegoat, not those responsible) probably just a token fine/slap on the wrist.

out of the 100 largest economies in the world 51 are multinationals (that figure might be a bit old by now though, not sure), so its something like half anyway. (i think that figure is comparing GDP with corporate turnover, presumably)

i would like to read up more on the history of this, it makes states weak in terms of their ability to determine policy and corporate law. (because a multinational can take its business elsewhere, or apply leverage with another instrument of some sort)

so in these terms what could the u.s. government or the state of alaska really do to BP?, i.e. dare they challenge them? (who is in charge exactly?, a difficult question to answer)

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 25, 2006, 4:44 PM

Post #13 of 24 (1905 views)

prudhoe cut again? [In reply to]

BP halted 90000 barrels out of Purdhoe bringing production to 111000bpd because of an apparent mechanical fault in ‘Gathering Centre 2’. There are further rumours BP will have to shut down the whole operation agian. If anything, BP is showing how a company that’s so big can convalude all aspects of their operation…..believe me, they aren’t he only ones.

Barry

Mr. Do It All

Aug 25, 2006, 9:15 PM

Post #14 of 24 (1902 views)

Re: [Barry] prudhoe cut again? [In reply to]

lol sorry mod i just re-read your post above mine and realised i repeated your words more or less. (pretty pointless comment lol 🙁

barry…what does convalude mean? (i looked in a dictionary but couldnt find it, economic/industry term?)

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 25, 2006, 9:43 PM

Post #15 of 24 (1901 views)

Re: [MarkTwain] prudhoe cut again? [In reply to]

I meant convulted. I guess a slang would be convulte… to twist the truth 😛

BTW, are you using the signature function in your profile to put your SIG? I don’t like how it’s not spaced…. I should look into it.

Barry

Mr. Do It All

Aug 26, 2006, 6:19 PM

Post #16 of 24 (1896 views)

Re: [Barry] prudhoe cut again? [In reply to]

ah i see, just a typo, thought it was word i didnt know. (“convolute” to correct your spelling btw)

re my sig, i put SIG before it because of the spacing (the two things are related lol), i.e. the SIG prefix is to differentiate it as a signature, because its hard to tell given the tight spacing.

(would be good if you could sort it out, keep a nice looking site nice looking 🙂

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 27, 2006, 3:28 PM

Post #17 of 24 (1890 views)

Re: [MarkTwain] prudhoe cut again? [In reply to]

Is convolute even in the dictionary/ Anyways,

BP has fixed a ‘compressor’ and production has been restored to about half or around 200 000 bpd. BP plans to replace about 25 KM of pipe whe nthe pipe manufacturer sends it over and they get on that……maybe next year 😛 They are already tearing down the old pipe but had to stop because workers came into contact with asbestos….

econmod

Aug 29, 2006, 11:40 AM

Post #18 of 24 (1880 views)

Re: [econmod] prudhoe cut again? [In reply to]

more woes for BP….(britains “biggest” company apparently) (story covers prudhoe aswell)

Inquiry into BP ‘market manipulation’

� Investigators look at crude oil and petrol trading

� Browne called to testify in person over Texas fire

http://business.guardian.co.uk/story/0,,1860727,00.html

If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed. Edmund Burke.

MarkTwain

Banker

Aug 29, 2006, 7:36 PM

Post #19 of 24 (1877 views)

BP CEO Answering TOugh Questions [In reply to]

Texan lawyers are off to the UK to ‘grill’ BP exec John Browne. But guess what, this has nothing to do with prudhoe.

Right now BP faces a) question about their texas refinery that blew up and killed 15.

b) market maniuplation for crude (Commodity Futures Trading Commission have sent subpoenas to BP and energy taders over the alledged manipulation)

c) Prudhoe

d) oh yea, suggestion they have manipulated the propane market too. (feb 2004, long story short, BP profts 20 million)

e) environmentalist would cry if they saw the damage done to the land from pruhoe. over 3/4 million barrels spilt.

Wow, time to buy shares!

Mod

Webmaster / Moderator

Aug 31, 2006, 12:35 PM

Post #20 of 24 (1859 views)

BP PLC Carrying Tests [In reply to]

HEres’ the latest about the pigs….. The results are apparently encouraging where much of the pipeline is without problems and the remainder have BP looking to reroute the flow…. Officials permitted part of the pipeline in question to reopen because safety requirements were met. So whats’ next…. demand in the states should taper as world prices decline admist the intro of the fall season.

Mod

Webmaster / Moderator

Sep 1, 2006, 6:16 PM

Post #21 of 24 (1849 views)

Re: [Barry] Oil Prices to Spike, BP Oil Field to Shut Down [In reply to]

US regulators are trying to push around the oil giant BP by making them prove they will be able to manage corrosion in the future. BP wants to send more pigs through the pipeline to the west in an attempt to see what they can salvage. BP still plans on building 26 km of new pipeline sometime next year.

econmod

Sep 13, 2006, 10:54 AM

Post #22 of 24 (1824 views)

Oil Prices to Spike, BP Oil Field Coming back [In reply to]

BP Exploration (Alaska) will re-start a portion of the Eastern Operating Area of Prudhoe Bay in order to run cleaning pigs and conduct an in-line inspection of the crude oil transit line using a “smart pig.” BP says three of the four flow stations currently on warm stand-by will be returned to full production.

The DOT approval allows BP to run an in-line diagnostic tool — called a smart pig — through a five-mile, 34-inch diameter segment that carries oil from processing facilities on the eastern half of the Prudhoe Bay field. The results of the smart pig inspection, to be confirmed with Ultrasonic Testing inspection, will help BP and the DOT determine whether to continue operations through the transit oil line or to shift production through a system of bypass lines currently under construction.

BP has performed tests on thousands of feet of the Eastern Operating Area pipeline using ultrasonic and other imaging equipment. As added precaution, BP’s start-up plans include an enhanced spill-response contingency plan, in which crews and material will be positioned to respond if any leak occurs. Resuming full operation of eastern Prudhoe should add about 200,000 barrels of daily oil production from the North Slope of Alaska. Current daily production from the rest of Greater Prudhoe Bay is about 250,000 barrels per day.

Mod

Webmaster / Moderator

Sep 30, 2006, 11:25 AM

Post #23 of 24 (1784 views)

BP 3rd quarter 2006 results [In reply to]

People ‘(or should I say investors) are noting BP’s idiocy… mind you, I can’t seem to think that other oil companies don’t ‘bend’ the rules too. BP had the opportunity to clean out their pipelines in 2004 but they didin’t bite saying it wasn’t a problem. Now their profit has fallen 3.6 in the 3rd quarter of 2006. But hey, oil all around has been weaker since demand is down, so no biggie for BP…. 😛

Barry

Mr. Do It All

Oct 25, 2006, 10:54 PM

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