ANCHORAGE, Alaska -- The retail gasoline price record could be shattered as BP Exploration Alaska Inc. began the phased shutdown Sunday of the Prudhoe Bay oil field following the discovery of unexpectedly severe corrosion and a small spill. Shutting down the field will take days to complete, and these actions will reduce Alaska North Slope oil production by an estimated 400,000 barrels per day, the company said. And it could take months to get it back on line.
August is a month prone to hysterical reactions, and we saw a bit of that today, Tom Kloza, senior analyst at the Oil Price Information [image-nocss] Service (OPIS), told CSP Daily News, as oil prices peaked at $77.30 a barrel before settling at $76.98 on the news. We all learned today that the global hot spots aren't just the Mideast and the Tropics. But no one would have expected that a hot spot might be north of the Arctic Circle.
He added, We'll probably see the nationwide record gasoline price$3.057 a gallon on Sept. 5, 2205shattered in the next 48 hours.
The West Coast is expected to be squeezed particularly hard, and the government is considering releasing oil from its emergency stockpile, the Strategic Petroleum Reserve (SPR), to ease the crunch, added an Associated Press report.
The decision follows the receipt on Friday of data from a smart pig run completed in late July. Analysis of the data revealed 16 anomalies in 12 locations in an oil transit line on the eastern side of the oil field. In response to the inspection data, BP conducted followup inspections of anomalies where corrosion-related wall thinning appeared to exceed BP criteria for continued operation. It was during these follow up inspections that BP personnel discovered a leak and small spill estimated at four to five barrels.
The spill has been contained and the cleanup effort is underway, BP said. The pipeline was shutdown at 6:30 am Sunday morning. BP has notified state and federal officials of the decision and will work closely with the U.S. Department of Transportation and the Alaska Department of Environmental Conservation, among others.
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, said Bob Malone, BP America chairman and president. 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 identifying and mobilizing additional resources from across Alaska and North America in order to speed inspection of remaining Prudhoe Bay oil transit lines. BP operates 22 miles of oil transit pipeline at Prudhoe Bay. Smart pigging inspection has been completed over about 40% of that length.
The oil field, the largest in the United States, which can produce 400,000 barrels of oil per day, accounts for 8% of U.S. domestic crude production. This is a significant stream of supply, there is no question about it. That is why we have things like the [SPR], the spokesman said.
Alaskan crude oil is typically used by oil companies with refineries on the West Coast, including BP, Exxon Mobil, Valero, Shell and ConocoPhillips.
The shutdown of BP's Prudhoe Bay field slashes Alaskan oil production by more than half.
U.S. oil refiners would have to request oil loans to put the process in motion, the spokesperson said. If it was requested, that is something we are certainly going to take a look at.
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