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Web Extra Monday, August 7, 2006

BP halts North Slope oil pipeline

In the latest blow to energy giant BP, the company started shutting down pipelines that transport oil from the Prudhoe Bay oil field on Alaska's North Slope early Sunday. BP announced the shutdown after finding what it calls "unexpectedly severe" corrosion in the pipeline, as well as a 4- to 5-barrel spill. The announcement raised oil prices today by more than $2 per barrel on the New York Merchantile Exchange, putting the price at a near-all-time high of $76.98.

The shutdown has halted the transport of about 400,000 barrels of oil per day, according to BP. That's about half of all oil produced on the North Slope, says Karen Matusic, a spokesperson at the American Petroleum Institute, or about 7.5 percent of the total crude oil produced in the United States, according to the U.S. Energy Information Administration.

BP detected the corrosion Friday when data from "smart pigs," devices sent through the pipes to locate anomalies, revealed 16 problem spots in 12 different locations. Parts of the pipe's wall sustained corrosion in "excess" of 70 percent, BP announced today in a press conference.

Detailed follow-up inspections over the weekend revealed pipe insulation contaminated with oil — which initiated the shutdown — followed by the discovery of a leak that spilled between 4 to 5 barrels of oil onto the tundra. The leak is now contained, and about half of the spill has been cleaned up, according to BP.

Four to 5 barrels (about 168 to 210 gallons) pales compared to the BP spill of more than 200,000 gallons of oil to the North Slope on March 2. That spill initiated a federal investigation, as well as the inspection that revealed the current corrosion, according to Reuters.

Corrosion levels revealed during the inspection were above that expected by BP, officials say. Some other corrosion mechanism must be occurring, BP officials say, adding that it could possibly be a microbial process, which will be either confirmed or ruled out after laboratory analysis of the pipe section.

Exactly how long the pipelines will be out of commission remains to be seen, as officials have not yet finished shutting them down — a process that could take three to five days, according to BP. "It's not just a matter of flipping a switch," Matusic says, adding that numerous precautionary measures are required.

To what extent prices at the pump will be affected also remains in question. Compared to BP's loss of 400,000 barrels per day as a result of the current shutdown, Hurricanes Katrina and Rita halted about 350,000 barrels per day and sent oil prices skyrocketing (see Geotimes online, Web Extra, Sept. 9, 2005). But the "big difference," Matusic says, is that the hurricanes destroyed refineries. With refineries now back up, imported crude oil can be refined and offset oil lost in Alaska, she says.

Sam Bodman, the U.S. Energy Secretary, said that the government "stood ready" to supply emergency oil from the U.S. Strategic Petroleum Reserve, according to Reuters, but that no requests have yet been made.

Kathryn Hansen

Reuters business story
Reuters news story
"Katrina strikes the energy sector," Geotimes online, Web Extra, Sept. 9, 2005
"Aging Alaska oil pipelines," Geotimes, July 2005

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