[Peakoil] BP: Pipeline closing may last for months

[Antony Barry]

 From http://news.yahoo.com/s/ap/20060808/ap_on_bi_ge/oil_field_shutdown

BP: Pipeline closing may last for months

By MARY PEMBERTON, Associated Press Writer 38 minutes ago

ANCHORAGE, Alaska - BP said Monday it discovered corrosion so severe  
that it will have to replace 16 miles of pipeline at the huge Prudhoe  
Bay oil field — work that could shut down the nation's single biggest  
source of domestic crude for months and drive gasoline prices even  
higher.

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Oil prices climbed more than $2 a barrel on the news, and gasoline  
futures rose, too. The West Coast is expected to be squeezed  
particularly hard, and the government is considering releasing oil  
from its emergency stockpile to ease the crunch.

BP PLC said it will have to replace most of the 22 miles of so-called  
transit pipeline at Prudhoe Bay, which produces about 2.6 percent of  
the nation's daily supply including imports, or about 400,000 barrels  
a day.

BP, the world's second-largest oil company, discovered the extent of  
the corrosion with tests that were ordered by the federal government  
after a big oil spill last March at Prudhoe Bay, situated above the  
Arctic Circle, 650 miles north of Anchorage.

The oil company said it was surprised to find such severe corrosion,  
and had gone 14 years without using a device called a "pig" to clean  
out its lines because it did not believe it was necessary.

Bob Malone, chairman of BP America, said that in a worst-case  
scenario, it could take weeks or months to replace the pipelines. But  
the company said it will try to put portions of the network back into  
operation as they are repaired.

"BP deeply regrets it has been necessary for us to take this drastic  
action," Malone said.

BP operates the Prudhoe Bay oil field for itself and for other oil  
companies, namely ConocoPhillips and ExxonMobil. Prudhoe Bay and  
other oilfields on Alaska's North Slope feed oil into the 800-mile  
trans-Alaska pipeline. The North Slope produces approximately 800,000  
barrels a day; Prudhoe Bay accounts for half of that.

BP officials said they did not immediately know how much it would  
cost to replace the lines. The company made $7.3 billion in profit  
during the most recent quarter.

"We estimate it could take between 2-3 months to get it back on  
line," Bruce Lanni, an industry analyst with A.G. Edwards, wrote in a  
research note. "However, there are no assurances that it will return  
to current capacity, given the complexities and age of the  
reservoirs. Thus, we would not be surprised to see volume losses in  
the area of 5 percent to 10 percent."

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