[Peakoil] Associated Press article: Major Alaskan Oil Field Shutting Down

[Michael Honey]

8% of domestic US oil production shut down for no-one knows how long...

http://www.newsvine.com/_news/2006/08/06/315060-major-alaskan-oil- 
field-shutting-down

ANCHORAGE, ALASKA — In a sudden blow to the nation's oil supply, half  
the production on Alaska's North Slope was being shut down Sunday  
after BP Exploration Alaska, Inc. discovered severe corrosion in a  
Prudhoe Bay oil transit line.

BP officials said they didn't know how long the Prudhoe Bay field  
would be off line. "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.

Once the field is shut down, in a process expected to take days, BP  
said oil production will be reduced by 400,000 barrels a day. That's  
close to 8 percent of U.S. oil production as of May 2006 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.

"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," BP America Chairman and President Bob Malone said in a  
statement.

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.

"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."

Malone said the field will not resume operating until the company and  
government regulators are satisfied it can run safely without  
threatening the environment.

Officials at BP, a unit of the London-based company BP PLC, learned  
Friday that data from an internal sensing device found 16 anomalies  
in 12 locations in an oil transit line on the eastern side of the  
field. Follow-up inspections found "corrosion-related wall thinning  
appeared to exceed BP criteria for continued operation," the company  
said in a release.

Workers also found a small spill, estimated to be about 4 to 5  
barrels. A barrel contains 42 gallons of crude oil. The spill has  
been contained and clean up efforts are under way, BP said. "Our  
production while all this is in place is going to be marginal," said  
Will Vandergriff, spokesman for Gov. Frank Murkowski. "That presents  
some technical problems because it's a high capacity line and it's  
meant to be filled."

Vandergriff said he did not know exactly what potential problems a  
sudden drop in oil flow might cause the pipeline. Alyeska Pipeline  
Co. officials could not immediately be reached for comment.

A prolonged shutdown would be a major blow to domestic oil  
production, but even a short one could be crippling to Alaska's economy.

According to forecast figures from the Alaska Department of Revenue,  
a 400,000 barrels of oil per day production drop would mean  
approximately $4.6 million per day lost to the state. That is money  
going to both the state treasury and the state's oil wealth savings  
account, the Alaska Permanent Fund.

"That starts adding up to big bucks in a hurry," said House Finance  
Co-Chairman Mike Chenault, R-Nikiski. "It could start having a  
disastrous effect on the state as early as today."

BP said it was sending additional resources from across the state and  
North America to hasten the inspection of the remaining transit  
lines. About 40 percent of the lines have been inspected.

BP previously said it would replace a 3-mile segment of pipeline  
following inspections conducted after up to 267,000 gallons of oil  
spilled onto the frozen ground about 250 miles above the Arctic  
Circle in March.

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.