Aug. 7 (Bloomberg) -- BP Plc is shutting Alaska's Prudhoe Bay oil field, the largest in the U.S., because of pipeline corrosion and a leak, stoking criticism of the company's safety record in its biggest market.

Oil rose 3 percent, and shares of London-based BP, the world's second-largest publicly traded oil company by production, slid 2.1 percent. It will take three to five days to finish shutting down production, the company said. It may take ``weeks or months'' to do the repair work, BP Alaska President Steve Marshall said today at a press conference in Anchorage.

Chief Executive Officer John Browne already faces a grand jury probe for an earlier Alaska spill, allegations of market manipulation in the U.S. propane industry and fines for a Texas refinery blast that killed 15 workers. BP, which gets 40 percent of its sales from the U.S., said last month it will boost spending there by $1 billion to improve safety and maintenance.

The Alaskan shutdown ``will prompt further questions about BP's safety procedures,'' said Ivor Pether, who helps oversee about $15 billion at Royal London Asset Management. ``It will have a big impact on earnings if it's shut down for a long period of time, but they absolutely have to do it.''

BP will replace about 16 miles (26 kilometers) pipeline, or nearly three-quarters of its 22 miles of pipe at Prudhoe Bay, Marshall said. The company said it will work with public agencies to determine if it's safe to operate parts of the field in the meantime. Prudhoe Bay accounts for about 1 percent of BP's earnings, Pether said.

`Woeful Run'

BP operates the Prudhoe Bay field and has a 26.36 percent ownership interest. Other owners of the field, which accounts for 8 percent of U.S. oil output, include Exxon Mobil Corp., ConocoPhillips and Chevron Corp.

Some 400,000 barrels a day of production is being idled, BP spokesman Ronnie Chappell said.

A section of pipe that leaked four to five barrels of oil was shut down at 6:30 a.m. Alaskan time on Sunday, BP said in a statement. Alaska provides about 10 percent of BP's worldwide oil production.

``This adds to a woeful run of reputationally damaging incidents,'' Jon Rigby, an analyst at UBS AG in London, wrote today in a research note.

U.S. Energy Secretary Samuel Bodman said the government will release oil from the nation's Strategic Petroleum Reserve if asked to make up for the loss of supplies from Alaska. The reserve holds about 688 million barrels of oil.

Oil Rises

The reserve is in salt caverns on the U.S. Gulf Coast. Shipping oil to West Coast refineries would take ``10 days to two weeks, I would guess,'' Bodman said.

Crude oil for September delivery rose $2.22 to $76.98 a barrel on the New York Mercantile Exchange, just shy of the all- time closing high of $77.03 on July 14. Crude touched an intraday high of $78.40 on July 14.

BP shares fell 13.5 pence to 622.5 pence in London.

Oil has climbed 26 percent this year as militant attacks cut shipments from Nigeria and Iran's nuclear standoff with the U.S. increased concern that Middle East supplies will be disrupted. The depletion of some of the world's largest fields, including Mexico's Cantarell, is also keeping prices high.

``Prudhoe Bay is a sizable flow and is key to the U.S. market,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo. ``It should have a fairly big effect.''

Exxon, ConocoPhillips

Exxon Mobil, the world's largest publicly traded oil company, owns about 36 percent of Prudhoe Bay, according to its Web site. Company spokeswoman Susan Reeves declined to comment on the field's closure or the effect on the Irving, Texas-based company.

Houston-based ConocoPhillips, the No. 3 U.S. oil company, owns 36.1 percent of Prudhoe Bay. San Ramon, California-based Chevron, the No. 2 U.S. oil company, owns about 1.2 percent and Denver, Colorado-based Forest Oil Corp. has 0.02 percent.

ConocoPhillips spokesman Charlie Rowton said his company can't assess the impact of the closing until it knows how long the field will be shuttered.

The field shutdown follows inspections along BP's pipeline system in late July, which revealed 16 anomalies in 12 locations in an line on the east side of the field. The company said it has inspected about 40 percent of the system.

Pipeline Corrosion

Marshall, the BP Alaska president, said more than 70 percent of the pipeline wall's thickness was corroded away in some places.

The leak and the discovery of corrosion ``have called into question the condition of the oil transit lines at Prudhoe Bay,'' Bob Malone, president of the company's BP America unit, 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 is getting extra resources from across Alaska and North America to speed the inspection of the remaining oil transit lines at the field, the company said.

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

March Leak

The 800-mile Trans Alaska Pipeline ships North Slope crude to Valdez, the northernmost ice-free port in North America. Alaskan oil is transported to refineries in Puget Sound, Washington, California and Hawaii.

The U.S. government in July issued a warning to BP over its Alaskan business, saying it has ``significant concern'' about the company's efforts to meet regulations imposed following the March oil leak, the Financial Times said July 27.

BP's March oil leak in Alaska of 270,000 gallons was caused by internal pipeline corrosion, spilling oil over 1.9 acres of tundra and frozen lake surface. The worst oil spill in U.S. history was the 1989 grounding of the Exxon Valdez tanker in Alaska's Prince William Sound, when 11 million gallons of crude were dumped.

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 restart date at this time.''

To contact the reporters on this story: Mathew Carr in London at m.carr@bloomberg.net; Ian McKinnon in Calgary at imckinnon1@bloomberg.net.

Last Updated: August 7, 2006 20:03 EDT