linuxgeek
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http://www.marketwatch.com/News/Sto...9D334DA-A1E9-4CF0-819D-F43244BFF373}&keyword=
BP vague on Prudhoe Bay restart, may take months
8:07 PM ET Aug 7, 2006
NEW YORK (MarketWatch) -- The restart of crude oil production at the BP PLC-operated (BP) Prudhoe Bay field in Alaska could take months as the Anglo-American energy major works to diagnose and repair problems in a pipeline system.
BP said late Sunday it had begun the shutdown of Prudhoe Bay, the largest producing oil field in the U.S. accounting for 8% of domestic output, after discovering severe corrosion along a transit line.
Bob Malone, president 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.
The unprecedented move in Alaska's North Slope hydrocarbons province sparked a rally in energy prices and elicited a response from the Organization of Petroleum Exporting Countries, which said it would be able to cover the shortfall of 400,000 barrels a day.
Although the U.S. West Coast is highly dependent on crude supply from Prudhoe Bay, many refiners said they didn't expect to cut processing rates in the near term. The legendary oil field has been producing since 1977 and hit peak output of about 1 million barrels a day in the late 1980s. Since then, the field has been in gradual decline.
In the past weeks, the burgeoning infrastructure problems have led to erratic oil flows from the North Slope, which usually ships about 800,000-850,000 barrels a day through the Trans-Alaskan Pipeline System.
Oil production at Prudhoe Bay could take six months or, perhaps, as much as a year to return to normal, Societe Generale said, citing an assessment by one of the bank's engineers with an oil-field services background.
"Three weeks is the absolute minimum," said Deborah White, an energy analyst with Societe Generale in Paris. "Six weeks makes a more likely base case."
The front-month crude oil contract for September delivery settled $2.22 higher Monday at $76.98 a barrel on the New York Mercantile Exchange, slightly off the intraday high of $77.30. That brought benchmark prices within shouting distance of an all-time high of $78.40 hit on July 14.
Signaling that the pipeline maintenance effort would be more complex than originally thought, Bob Malone, president of BP America, said BP would replace the field's main transit lines as part of a "wider plan in restoring production and operations in a safe manner."
BP will also conduct a study, together with supervising government agencies, to determine if it's possible to continue production from some parts of the field, Malone added.
Early Warning Signs
BP blamed that spill, the largest ever on the North Slope at more than 200,000 gallons, on a corroded transit pipeline.
The company is confronting increased regulatory scrutiny not only for this accident and other snags in Alaska but also for a slew of other problems that have plagued its North American operations. BP faces a criminal investigation over a March 2005 explosion at a refinery in Texas City, Texas, that killed 15 worked. In addition, U.S. agencies have alleged that BP traders manipulated the propane market in early 2004.
Amid this turmoil, BP in late June appointed Malone to replace the retiring head of its North American division. Under pressure, BP is exercising great caution across its U.S. operations - from a slow restart at the Texas City refinery to the Prudhoe Bay shutdown.
"The discovery of this leak... (has) called into question the condition of the oil transit lines at Prudhoe Bay," Malone said. "We will not resume the operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment."
During recent pipeline testing, BP discovered 16 anomalies in 12 locations along the transit line as well as a small oil spill of four to five barrels.
On the same conference call with Malone, Steve Marshall, head of BP Exploration Alaska, said corrosion that resulted in the leak discovered Friday was "different" from the corrosion analyzed in the March spill.
BP received data on the state of the pipeline on Aug. 4, one day after BP Chief Executive John Browne met with Alaska Gov. Frank Murkowski and apologized for the March spill.
Although it's the operator of the Prudhoe Bay license area, BP only owns 26.4% of the project. Other shareholders include Exxon Mobil Corp. (XOM) with 36.4% and ConocoPhillips (COP) with 36.1%.
Refiner Response
Refineries in the Pacific Northwest, customers for 60% of Alaska North Slope crude, are expected to take the biggest hit.
"There will be sufficient impact, but we just don't know what the overall impact will be," said an official at one Pacific Northwest refiner. "Everyone is scrambling to procure alternative supply."
While the spot market for crude was relatively quiet on the West Coast, premiums for spot gasoline and diesel surged. The premium for Los Angeles gasoline shot up from 7.0 cents to 16.0 cents over the September Nymex contract for reformulated gasoline blendstock for oxygen blending. Diesel was also active; its premium to Nymex front-month heating oil rose to 26.25 cents from 23.5 cents - on top of the 5.39 cents rise to the heating oil contract itself, which settled at $2.1435 a gallon.
The other 40% of Alaskan crude is split between the Los Angeles Basin and the San Francisco Bay Area.
Tesoro Corp. (TSO), an independent refiner with operations concentrated on the West Coast, said its operations haven't been affected by the outage of Prudhoe Bay because only 10% of its crude supply comes from the field. Valero Energy Corp. (VLO), Royal Dutch Shell PLC (RDSB.LN) and ConocoPhillips (COP) also said they weren't seeing an immediate affect to operations.
However, most traders said they were hunkering down and awaiting better guidance from BP on the duration of the outage before taking drastic action.
Supply Response
OPEC meanwhile, said it was concerned with the impact the outage would have on oil markets and "would work to ensure that the disruption does not cause any supply shortage on the market."
The Middle East supplies Asia with cargoes, and if the region increases supply going east, some of those additional volumes, attracted by rising prices, could make their way to refining hubs in California.
U.S. Energy Secretary Samuel Bodman said oil from the nation's Strategic Petroleum Reserve could be shipped to West Coast refiners by barge or could be utilized in swaps. In such an exchange, a refinery owner in the Gulf Coast could receive SPR crude and then send crude from a different location to the West Coast.
BP vague on Prudhoe Bay restart, may take months
8:07 PM ET Aug 7, 2006
NEW YORK (MarketWatch) -- The restart of crude oil production at the BP PLC-operated (BP) Prudhoe Bay field in Alaska could take months as the Anglo-American energy major works to diagnose and repair problems in a pipeline system.
BP said late Sunday it had begun the shutdown of Prudhoe Bay, the largest producing oil field in the U.S. accounting for 8% of domestic output, after discovering severe corrosion along a transit line.
Bob Malone, president 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.
The unprecedented move in Alaska's North Slope hydrocarbons province sparked a rally in energy prices and elicited a response from the Organization of Petroleum Exporting Countries, which said it would be able to cover the shortfall of 400,000 barrels a day.
Although the U.S. West Coast is highly dependent on crude supply from Prudhoe Bay, many refiners said they didn't expect to cut processing rates in the near term. The legendary oil field has been producing since 1977 and hit peak output of about 1 million barrels a day in the late 1980s. Since then, the field has been in gradual decline.
In the past weeks, the burgeoning infrastructure problems have led to erratic oil flows from the North Slope, which usually ships about 800,000-850,000 barrels a day through the Trans-Alaskan Pipeline System.
Oil production at Prudhoe Bay could take six months or, perhaps, as much as a year to return to normal, Societe Generale said, citing an assessment by one of the bank's engineers with an oil-field services background.
"Three weeks is the absolute minimum," said Deborah White, an energy analyst with Societe Generale in Paris. "Six weeks makes a more likely base case."
The front-month crude oil contract for September delivery settled $2.22 higher Monday at $76.98 a barrel on the New York Mercantile Exchange, slightly off the intraday high of $77.30. That brought benchmark prices within shouting distance of an all-time high of $78.40 hit on July 14.
Signaling that the pipeline maintenance effort would be more complex than originally thought, Bob Malone, president of BP America, said BP would replace the field's main transit lines as part of a "wider plan in restoring production and operations in a safe manner."
BP will also conduct a study, together with supervising government agencies, to determine if it's possible to continue production from some parts of the field, Malone added.
Early Warning Signs
BP blamed that spill, the largest ever on the North Slope at more than 200,000 gallons, on a corroded transit pipeline.
The company is confronting increased regulatory scrutiny not only for this accident and other snags in Alaska but also for a slew of other problems that have plagued its North American operations. BP faces a criminal investigation over a March 2005 explosion at a refinery in Texas City, Texas, that killed 15 worked. In addition, U.S. agencies have alleged that BP traders manipulated the propane market in early 2004.
Amid this turmoil, BP in late June appointed Malone to replace the retiring head of its North American division. Under pressure, BP is exercising great caution across its U.S. operations - from a slow restart at the Texas City refinery to the Prudhoe Bay shutdown.
"The discovery of this leak... (has) called into question the condition of the oil transit lines at Prudhoe Bay," Malone said. "We will not resume the operation of the field until we and government regulators are satisfied that they can be operated safely and pose no threat to the environment."
During recent pipeline testing, BP discovered 16 anomalies in 12 locations along the transit line as well as a small oil spill of four to five barrels.
On the same conference call with Malone, Steve Marshall, head of BP Exploration Alaska, said corrosion that resulted in the leak discovered Friday was "different" from the corrosion analyzed in the March spill.
BP received data on the state of the pipeline on Aug. 4, one day after BP Chief Executive John Browne met with Alaska Gov. Frank Murkowski and apologized for the March spill.
Although it's the operator of the Prudhoe Bay license area, BP only owns 26.4% of the project. Other shareholders include Exxon Mobil Corp. (XOM) with 36.4% and ConocoPhillips (COP) with 36.1%.
Refiner Response
Refineries in the Pacific Northwest, customers for 60% of Alaska North Slope crude, are expected to take the biggest hit.
"There will be sufficient impact, but we just don't know what the overall impact will be," said an official at one Pacific Northwest refiner. "Everyone is scrambling to procure alternative supply."
While the spot market for crude was relatively quiet on the West Coast, premiums for spot gasoline and diesel surged. The premium for Los Angeles gasoline shot up from 7.0 cents to 16.0 cents over the September Nymex contract for reformulated gasoline blendstock for oxygen blending. Diesel was also active; its premium to Nymex front-month heating oil rose to 26.25 cents from 23.5 cents - on top of the 5.39 cents rise to the heating oil contract itself, which settled at $2.1435 a gallon.
The other 40% of Alaskan crude is split between the Los Angeles Basin and the San Francisco Bay Area.
Tesoro Corp. (TSO), an independent refiner with operations concentrated on the West Coast, said its operations haven't been affected by the outage of Prudhoe Bay because only 10% of its crude supply comes from the field. Valero Energy Corp. (VLO), Royal Dutch Shell PLC (RDSB.LN) and ConocoPhillips (COP) also said they weren't seeing an immediate affect to operations.
However, most traders said they were hunkering down and awaiting better guidance from BP on the duration of the outage before taking drastic action.
Supply Response
OPEC meanwhile, said it was concerned with the impact the outage would have on oil markets and "would work to ensure that the disruption does not cause any supply shortage on the market."
The Middle East supplies Asia with cargoes, and if the region increases supply going east, some of those additional volumes, attracted by rising prices, could make their way to refining hubs in California.
U.S. Energy Secretary Samuel Bodman said oil from the nation's Strategic Petroleum Reserve could be shipped to West Coast refiners by barge or could be utilized in swaps. In such an exchange, a refinery owner in the Gulf Coast could receive SPR crude and then send crude from a different location to the West Coast.
3.5 gallons to the tank
$280 is quite impressive in itself. I remember when I could FILL my old pimped out Honda for $15. Damn. 
