Jan. 10 (Bloomberg) -- BP Plc and its partners in the Trans-Alaska Pipeline System that carries 15 percent of U.S. crude output can’t say when production will return to normal after a leak two days ago.
The shutdown forced BP, ConocoPhillips and Exxon Mobil Corp. to suspend 95 percent of production from the North Slope area. The pipeline remained closed as of 10:21 a.m. New York time today with no estimate of when it will return to service, said Michelle Egan, a spokeswoman for operating partnership Alyeska Pipeline Service Co.
Oil futures in New York jumped as much as 2.2 percent to $89.98 a barrel, advancing for the first time in three days, while BP fell the most in three weeks. The leak, which has been contained, was thought to be located in an underground section of piping at Pump Station 1 and hasn’t caused any injuries or damage to the environment, Alyeska said in a statement.
“This is a very, very minor leak,” analysts at JPMorgan Chase & Co. led by Lawrence Eagles said in a note to clients. “From an engineering perspective, we would doubt that any shutdown will last more than two to three days. However, government inspectors are likely to want a more comprehensive understanding of the cause.”
Crude oil for February delivery was up $1.33, or 1.5 percent, to $89.36 a barrel at 11:07 a.m. on the New York Mercantile Exchange.
Alyeska recovered around nine or 10 barrels of crude oil after a spill was discovered early on Jan. 8 inside a booster pump building at Pump Station 1, according to a report from the Alaska Department of Environmental Conservation issued at 4:00 p.m. local time yesterday.
Crews are working on plans to install a bypass line to carry oil from booster pump 1 to the main pipeline pump, according to the report. The temperature of the line is being monitored and Alyeska plans to periodically circulate oil within the pump stations to keep equipment and oil warm.
Workers are reviewing a “cold restart” procedure and will restart the line when state and federal regulators are confident that it can be done safely, the state said in the report.
“There is as yet no restart date, but we would not be surprised if a further week is added to the process,” JPMorgan analysts said.
Parts necessary to repair and bypass the damaged line are being fabricated in Fairbanks and will be flown to the North Slope, state investigators said.
Tesoro Corp. will be “minimally impacted” in the short-term by the outage, Mike Marcy, a company spokesman, said in an e-mail. Valero Energy Corp.’s California refineries are not affected, Bill Day, a spokesman for Valero, said in an e-mail.
The shutdown is a further setback for BP, whose well blowout in the Gulf of Mexico in April led to the biggest offshore oil spill in U.S. history. The company’s North Slope production is about 410,000 barrels a day.
BP, which owns almost 47 percent of the pipeline system, fell as much as 2.7 percent in London and traded 1.1 percent lower at 487.35 pence as of 10:56 a.m. in New York.
Credit-default swaps on BP rose 9.5 basis points to 96.5, the highest level in a month, according to data provider CMA. An increase in the contracts that protect against losses on BP’s debt indicates worsening perceptions of credit quality.
Crude prices rose 21 percent in the second half of last year, and reached a 27-month high of $92.58 on Jan. 3 on speculation the U.S. economic recovery will boost fuel demand in the world’s biggest oil-consuming country.
“The shutdown is being factored into prices,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “People are a little more concerned with supply constraints than they were six months ago.”
The pipeline system transported an average 642,261 barrels a day last month, according to Alyeska’s website. The network starts in Prudhoe Bay on the North Slope and runs to Valdez, the northernmost ice-free port in North America.
Tankers were being loaded with reserve supplies at Valdez yesterday, according to Alyeska’s Egan. Inventories in Alaska stood at about 2.68 million barrels of crude as of Jan. 6, according to the state’s website.
There were no injuries and no “apparent impacts to the environment,” the company said. Federal and state staffs are helping with the response and crews began recovering oil about seven hours after the shutdown, according to Alyeska.
Toby Odone, a London-based spokesman for BP, said it’s up to Alyeska to provide updates, and declined to comment further yesterday. Alyeska is owned by BP, ConocoPhillips, Exxon Mobil Corp., Chevron Corp. and Koch Industries Inc., according to statements on its website.
Prudhoe Bay and other Alaskan fields were BP’s largest source of crude in the Western Hemisphere in 2009 after the Gulf of Mexico, according to a public filing. Alaskan fields provided one in every 14 barrels of oil BP pumped worldwide that year. The company operates or holds stakes in 20 other fields on Alaska’s North Slope, as well as four pipelines.
BP owns 26 percent of Prudhoe Bay and neighboring fields in Alaska with Exxon, ConocoPhillips and Chevron. The Prudhoe Bay deposit, the largest field in the U.S., came online in 1977.
The Alaskan pipeline system was also shut last May after a leak, according to a company statement at the time. In March 2006, the Trans-Alaska system spilled 6,400 barrels in a discharge caused by corrosion on a pipe wall.
“We have had significant production reduction before for various reasons, including bad weather,” said Steve Rinehart, a spokesman for BP in Anchorage. “It’s not uncommon.”
ConocoPhillips has prorated its production to 5 percent, Natalie Lowman, a ConocoPhillips spokeswoman in Anchorage, said yesterday in a telephone interview.
BP shares have gained about 60 percent since June after the company agreed to set up an escrow account to pay for the cleanup and economic losses from the Macondo well blowout. The April 20 explosion, which killed 11 workers, destroyed Transocean Ltd.’s $365 million Deepwater Horizon rig and spewed crude for 87 days.
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