BP Shuts 100,000 Barrels of Alaska Oil (AP)

By Alan Zibel

BP Shuts 100,000 Barrels of Output in Prudhoe Bay for a 'Few Days' Due to Water Pipeline Leak

WASHINGTON (AP) -- BP said Tuesday it will shut down 100,000 barrels, or one quarter, of its Alaskan oil production for a "few days" after discovering a water pipeline leak. Analysts said the temporary loss of output at Prudhoe Bay should not have a dramatic impact on world oil markets, but with supplies already tight and crude futures trading near $66 a barrel, any snag in the industry tends to make energy traders jittery. Light sweet crude for June delivery fell 32 cents to $65.95 a barrel in electronic trading on the New York Mercantile Exchange. London-based BP said the leak was discovered Monday in a 12-inch pipe that collects water separated from the oil and gas it produces. "We're putting together inspection and repair plans to return the facility to normal operations," BP spokesman Neil Chapman in Houston said. Alaron Trading Corp. analyst Phil Flynn downplayed the significance of the event for U.S. energy consumers. "It's not that (this lost production) can't be made up elsewhere in the world," he said, "but we would like to get production here rather than elsewhere."

U.S. refiners convert more than 15 million barrels a day of crude oil into gasoline, diesel and other liquid fuels -- and about two-thirds of that oil comes from abroad. The country imports an additional 2.6 million barrels a day of refined products, according to recent Energy Department statistics. BP's Prudhoe Bay shutdown was disclosed late Monday by Rep. Bart Stupak, D-Mich., who has been critical of the company's maintenance practices in Alaska, where two separate leaks occurred last year. BP confirmed the shutdown Tuesday morning. Internal company documents released at a hearing chaired by Stupak last week suggested that budget cuts by BP had put pressure on managers to ignore corrosion prevention at the oil company's North Slope pipelines. Corrosion, much of it hidden by development of high amounts of sludge, caused a leak and spill on a feeder line in March 2006, followed by another leak in August at a second line. After the second incident, the company shut down the affected lines, resulting in Prudhoe Bay production being cut in half. The company now is spending $250 million to replace 16 miles of questionable pipes.

Robert Malone, chairman of BP America Inc., BP Plc's U.S. subsidiary, acknowledged at the hearing that there were "extreme budget pressures at Prudhoe Bay" because of a sharp decline in production from the North Slope. But Malone disputed that the budget cuts were to blame for the pipeline breaks. Shares of BP dropped 52 cents to $68.92 in morning trading.