Alaska pipeline disruption boosts prices, hurts BP

January 10, 2011

An oil tanker is seen moored at the Trans-Alaska Pipeline Marine Terminal in Valdez, Alaska in this file picture of August 9, 2008. – Reuters pic

ANCHORAGE, Jan 10 – The shutdown of the Trans Alaska Pipeline, which ships 12 per cent of US crude output, boosted oil prices by as much as 2.2 per cent and spooked investors in BP, one of the owners of the pipeline.
The shutdown entered its third day today after a leak was discovered at the northern end of the pipeline in Prudhoe Bay early Saturday, forcing oil companies to cut output to 5 per cent of their average 630,000 barrels per day.

The shutdown is the latest setback for the pipeline, which currently handles less than a third of the oil it did at its peak in the 1980s.

Closures of the pipeline have provoked criticism of the companies involved, particularly of BP which owns a majority stake in the operator of the pipeline, Alyeska Pipeline Service Co, and which is trying to claw its way back from the largest-ever US oil spill in the Gulf of Mexico last year.

Shares in BP were down 1.8 per cent to 483.5 pence at 1217 GMT, paring earlier losses of as much as 2.7 per cent and underperforming the European index of oil and gas companies which was 0.5 per cent lower.

Analysts downplayed the significance of the shutdown for BP, which has seen its share price rebound 20 per cent since the beginning of December on hopes that the worst of the US spill is behind it, but said sentiment would be hurt in the short term.

“I think if BP had not had the Macondo incident last year then this would have just been a minor operational incident for the company but it’s just under scrutiny because it’s connected with everything else that BP’s connected with,” said ING Financial Markets analyst Jason Kenney.

Analysts at Oriel Securities said that the shutdown would have little direct impact on BP beyond the short term shut in of Prudhoe Bay which it says is forecast to account for 5 per cent of BP’s expected oil production in 2011.

The shutdown of the 1,280km line, which runs from the Prudhoe Bay oilfield to the tanker port of Valdez in southern Alaska, has not yet affected shipments, and tankers are being loaded on schedule at Valdez, meaning there is no immediate danger of restricted oil supply.

Oil produced during the shutdown will be stored at Prudhoe Bay until the pipeline reopens.

“For the global overall market, it should justify a minor reaction,” Loacker said. “It’s of course a problem for North America, but it wouldn’t justify that the price increases by 2 or 3 per cent.”

US crude for February jumped as much as 2.2 per cent earlier today, but then retreated to add 0.8 per cent to US$88.69 at 1158 GMT.

Response crews have recovered nine to 10 barrels of oil from the basement of a booster pump building, about 90 per cent, Alyeska said yesterday.

Engineers are considering options for restarting the line, including a plan to bypass the affected piping, Alyeska said.

Alyeska is owned by the companies which operate on Alaska’s North Slope – BP owns about 47 per cent of the venture, while ConocoPhillips and ExxonMobil hold 28 per cent and 20 per cent respectively.

The pipeline carries all crude produced from Alaska’s North Slope oilfields. Normally, about 43 per cent of oil flowing through the pipeline belongs to ConocoPhillips, 30 per cent to BP and 20 per cent to Exxon Mobil.

The last time the pipeline was shut down unexpectedly was in May, when a power outage at a pump station triggered a series of events that caused an estimated 5,000 barrels of crude oil to spill out of the storage tank at Pump Station 9, located about 105 miles south of Fairbanks.

Oil flow through the line peaked in 1988 at over 2 million barrels a day, but output from Prudhoe Bay and other maturing North Slope fields has dwindled significantly since then. – Reuters

from : The Malaysian Insider