Corrosion, oil spill prompt shutdown of Prudhoe Bay, Alaska oil pipeline

Anchorage, Alaska

Bp Plc, under a U.S. grand jury investigation over an oil spill previously, has shut down the Prudhoe Bay, Alaska oil field after discovering severe corrosion and a small spill from a transit pipeline.

The shutdown of about 400,000 barrels a day at the largest U.S. field will take days to complete and the company doesn't know when production will resume, field operator BP Exploration Alaska Inc. said in a statement through PRNewswire. The pipeline was shut down at 6:30 a.m. Alaskan time Sunday, it said. Oil prices rose as much as 0.3 percent.

The world's second-largest publicly traded oil company is under a U.S. grand jury investigation over an oil spill in Alaska. About 6,400 barrels of oil leaked from a Prudhoe Bay pipeline in March, almost a year after an explosion at a Texas refinery killed 15 workers and led to the biggest fine by U.S. refinery safety regulators.

The discovery of the corrosion and a leak of four to five barrels "have called into question the condition of the oil transit lines at Prudhoe Bay," Bob Malone, BP America President, said in the statement. "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."

BP owns 26.36 percent of the Prudhoe Bay field. Other shareholders include Exxon Mobil Corp., ConocoPhillips and Chevron Corp. Alaska provides about 10 percent of BP's worldwide oil production.

Crude-oil production shutdowns in Nigeria earlier this year and concerns about potential supply disruptions in Iran and elsewhere in the Middle East helped push oil prices to a record this year. Oil reached $78.40 a barrel on July 14. It rose as much as 21 cents to $74.97 a barrel in after-hours trading on the New York Mercantile Exchange at 9:41 a.m. Singapore time.

Pipeline Inspections

BP's decision to close down the Prudhoe Bay field follows the analysis of data from inspections along the pipeline system in late July, which revealed 16 anomalies in 12 locations in an oil line on the eastern side of the field, BP said. BP operates 22 miles of oil transit lines at Prudhoe Bay and has inspected about 40 percent of the system.

BP is getting extra resources from across Alaska and North America to speed the inspection of the remaining oil transit lines at the field, it said.

The shutdown of the line, which supplies the Trans-Alaska Pipeline, only affects Prudhoe Bay and not other fields in the remote region, Ronnie Chappell, a BP spokesman, said in a telephone interview. The field's output peaked in 1989 at 1.5 million barrels a day and has been declining since, he said.

BP agreed to inspect oil feeder lines at Prudhoe Bay after the March spill, Chappell said. This is the first time the field has been shut down because of corrosion in a feeder line, he said.

"We need to understand why the corrosion is as severe as it is," Chappell said. "We do not have a firm re-start date at this time."