Alaskan oil field shut down because of corrosion, small spill

This can’t be good

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.

But don’t worry, BP (British Petroleum) has apologized

“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.”
Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said he expected the impact to be minimal.

“The U.S. market is actually well-supplied; crude inventories are very high,” he said. “So while this won’t have any immediate impact on U.S. supplies, the market is in very high anxiety. So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage.”

These are guesses based on very little knowledge, to include the critical item of how long the pipeline will be shut down. However, expect oil prices to be volatile tomorrow based on the market drivers of fear, uncertainty, and doubt. There are many more technical details at the link,to include that the spill was 4-5 barrels (42 gallons/barrel).

FILED UNDER: Environment, National Security, ,
Richard Gardner
About Richard Gardner
Richard Gardner is a “retired” Navy Submarine Officer with military policy, arms control, and budgeting experience. He contributed over 100 pieces to OTB between January 2004 and August 2008, covering special events. He has a BS in Engineering from the University of California, Irvine.

Comments

  1. Old War Dogs says:

    Alaskan oil field shut down because of corrosion, small spill…

    From OTB: This can’t be good 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…

  2. BP closing Alaskan oil field…

    Half the oil production on Alaska’s North Slope was being shut down Sunday after severe corros…

  3. […] Hat tip:  Outside the Beltway […]

  4. So ANWR is not important to US energy supply, but shutting down other parts of Alaskan drilling would have a major impact.

    BTW, I heard that the energy department is planning to release some of the 700 million barrels of strategic oil reserve to make up for the difference in supply.

  5. legion says:

    Well, if there was ever a legitimate reason to tap the strategic reserves, this looks like it.

    “The U.S. market is actually well-supplied; crude inventories are very high,” he said. “So while this won’t have any immediate impact on U.S. supplies, the market is in very high anxiety. So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage.”

    Feh. I’m quite certain gas in my area will be up by a dime or more by tomorrow.

    Also, does anyone know if ANWR oil would have been affected by this closure as well? Or would it come to us via a different route?