Biggest Oil Field in U.S. Is Forced to Stop Pumping
By CLIFFORD KRAUSS and JEREMY W. PETERS
BP began shutting down the nation’s largest oil field yesterday after an inspection detected heavy corrosion and a small leak in a critical pipeline in its Prudhoe Bay operation in Alaska. The emergency drove already-high world crude oil prices to just under $77 a barrel.The company said that it would take three to five days to shut the pipeline system that serves Prudhoe Bay on the North Slope of Alaska. BP said it could not estimate how long the system would be down as it replaced all 16 miles of feeder pipelines that connect the Prudhoe Bay field with the larger Trans-Alaska Pipeline.Bob Malone, president of BP America, said at a news conference in Anchorage that the company would look for a way to get at least some of the oil flowing again, quickly and safely, to limit the impact on the nation’s oil supply. He issued a public apology.The Prudhoe Bay field produces 400,000 barrels a day, or 8 percent of American crude. Another 380,000 barrels a day from the North Slope is not affected by the shutdown. The shutdown is expected to roil the Alaskan economy for months, if not longer. California and the rest of the West Coast also stand to suffer economic damage since refineries there are designed to process the Alaskan crude.Coming at a time of rising turbulence in the Middle East and threats by Iran to use oil as a political weapon, the news from Alaska pushed the price of crude oil for September delivery up $2.22, or 3 percent, to $76.98 a barrel. While that is close to a record high, it is still lower than the inflation-adjusted record of about $85 a barrel reached in 1981. The effects of the big jump in oil prices were seen worldwide yesterday, with stock prices declining in Europe and the United States. Prices at the gas pump began to rise as much as 5 cents a gallon in some cities. Analysts predicted an additional rise of at least another 5 cents in the coming days, particularly on the West Coast. Daniel Yergin, president of Cambridge Energy Research Associates, said the shutdown would not ordinarily be a major problem by itself. But he added: “This is a disruption on top of several other disruptions that are currently afflicting the world’s oil markets in Nigeria, Iraq, Venezuela and production is still out in the Gulf of Mexico. The numbers are starting to add up.”
The discovery of pipeline corrosion, and the shutdown to do emergency repairs, are the latest in a string of embarrassments for BP, which is based in London but has operations in the United States that are bigger than those of Exxon Mobil. Its troubles also come as Congress is debating whether to expand oil drilling on the North Slope. The House recently approved drilling for oil and gas in the Arctic National Wildlife Refuge, but the Senate has remained reluctant to act because of environmental concerns. Oil companies may now have a tougher time reassuring lawmakers.The discovery of corrosion in the pipeline caught BP by surprise, and as of yesterday, the company was still trying to determine the cause. As a result, it is re-evaluating how it conducts inspections along the pipeline.“We can’t explain it,” Ronnie Chappell, a spokesman for BP said. The company’s regular practice in Prudhoe Bay had been to spot-check sections of pipeline that were prone to corrosion.“We believed that this program was giving us an accurate view of what was occurring in these pipelines,” Mr. Chappell said. “But the discovery of this unexpectedly severe corrosion in this particular segment of line has caused us to rethink that.” Mr. Chappell said the pipes where the corrosion was detected had not been inspected with a “smart pig,” a device that travels through the inside to measure pipe wall thickness, since 1992. The reason the device was not used, he said, was that the pipes were too clogged with sludge for the device to pass through easily. But after a major spill in March along the same network of pipes, the Department of Transportation ordered inspections with the smart pig. Those tests revealed that the steel had corroded in 12 places on the eastern side of Prudhoe Bay to thicknesses less than BP considers safe. In those areas, tests found losses of 70 to 81 percent in the 3/8-inch thickness of the wall, the company said. In one area, it said, the equivalent of four to five barrels of oil had already leaked out of the pipeline because of the rusting. The company said that spill had been contained, and that workers were in the process of vacuuming it up from the tundra.Ten miles of the 16 miles of pipeline in the Prudhoe Bay field have yet to be inspected with the smart pig, raising the possibility that more severe corrosion could be detected. Six miles of pipeline at BP’s Lisburne field, near Prudhoe Bay, were not affected by the shutdown and remain operational.Because the company is uncertain how long it will take to make the repairs, the final cost of the emergency shutdown is difficult to estimate. The company said it had not yet done an analysis to determine the financial impact. The shutdown further sullied the reputation of BP as it was trying to re-engineer its marketing to project the image of an environmentally sensitive company committed to controlling climate change. BP executives were quick to acknowledge the dimensions of their new problem, which comes in the wake of a deadly refinery explosion last year in Texas and the 270,000-gallon spill on the North Slope in March. That spill, the worst since production began on the North Slope, has resulted in a federal criminal investigation.“BP deeply regrets that it’s been necessary for us to take this drastic action,” Bob Malone, president of BP America, said at a news conference. “I apologize for the impact this has had on our nation and to the great state of Alaska.” BP said it was studying the possibility of operating portions of the pipelines to reduce the disruption, but it is unclear whether it can do that. The Prudhoe Bay field was discovered in 1968 and came on stream in 1977, producing 10 billion barrels so far. BP operates the field, with nine other companies holding interests in field leases including ConocoPhillips and Exxon Mobil. ConocoPhillips estimated a loss of about 144,000 barrels a day in crude oil production. It said it did not know yet the impact of the loss on its overall operations. Exxon Mobil estimated a similar loss in production. Mr. Malone, the BP America president, acknowledged that the discovery of severe corrosion in the pipelines and the small oil spill had called into question the condition of most of the oil transit lines at Prudhoe Bay.“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,” Mr. Malone said. The immediate price rise may have been even higher had the Bush administration not immediately signaled that it was ready to release oil from the Strategic Petroleum Reserve to ease lost supplies. “I’m obviously concerned,” Energy Secretary Samuel W. Bodman told reporters as he promised to help West Coast refiners find additional supplies. OPEC quickly announced it would use its spare capacity to compensate for any shortfalls arising from the Prudhoe Bay field shutdown, but additional supplies expected from Saudi Arabia would be of a lower quality than the Alaskan supplies. Oil industry leaders said West Coast refineries could feel the pinch of shortages in crude in a matter of weeks, even with the release of strategic reserves since those reserves tend to have higher sulfur content than many of the California refineries are designed to process. Some of the West Coast refineries, however, are owned by major international companies that have easier access than other refineries to world supplies. “Practically all of this impact and loss of supply will occur on the West Coast,” said Bob Slaughter, president of the National Petrochemical and Refiners Association. But, he added, “One of the things we learned from Katrina and Rita is that a problem in one part of the U.S. quickly affects the entire U.S. and often the world supply and demand as well.” The shutdown spurred calls in Congress to give the Department of Transportation greater powers to impose stronger maintenance standards on pipelines and it brought more criticism of Big Oil at a time of historic profits.
“With oil above $70 per barrel and BP making record profits, it can afford to properly clean and maintain its pipelines,” said Representative Edward J. Markey, a Massachusetts Democrat and member of the House Energy and Commerce Committee. “This sudden loss of production will dramatically increase oil prices and the American people will be footing the bill for this combined failure of D.O.T.’s regulatory oversight and BP’s corporate responsibility.”
So, what the hell did you do with the 10 billion fuckin dollars in profit this last quarter? You haven't done maintenence in over a decade? Are you kidding me? Congress is acting very sanctimoniously over this but remember who has the biggest hand in THEIR pockets. Yep, big oil. There will be hearings then the oil companies will bitch slap these guys and threaten to withhold campaign $$, then it will all go away until next quarter when BP announces it has made $20 billion in profits.When will it all stop? When we all wake up and start using wind power, solar power and all over renewable sources. It's going to be hell on our kids no?
