| rocky |
Those gas gougers aka the oil companies are going to take advantage of th e loss of 8% of US production caused by the closure of a major section of the BP/Amoco alaska pipeline due to corrosion.
Funny how prices in the UK for gas have not risen since Katrinia yet ours have gone up so much......
From the NY Times
Major Alaskan Oil Field Shutting Down
By THE ASSOCIATED PRESS
Published: August 7, 2006
Filed at 3:37 a.m. ET
ANCHORAGE, Alaska (AP) -- In a sudden blow to the nation's oil supply, half the production on Alaska's North Slope was being shut down Sunday after BP Exploration Alaska, Inc. discovered severe corrosion in a Prudhoe Bay oil transit line.
BP officials said they didn't know how long the Prudhoe Bay field would be off line. ''I don't even know how long it's going to take to shut it down,'' said Tom Williams, BP's senior tax and royalty counsel.
Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That's close to 8 percent of U.S. oil production as of May 2006 or about 2.6 percent of U.S. supply including imports, according to data from the U.S. Energy Information Administration.
The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.
''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,'' BP America Chairman and President Bob Malone said in a statement.
A 400,000-barrel per day reduction in output would have a major impact on oil prices, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.
''Oil prices could increase by as much as $10 per barrel given the current environment,'' Emori said. ''But we can't really say for sure how big an effect this is going to have until we have more exact figures about how much production is going to be reduced.''
Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said he expected the impact to be minimal.
''The U.S. market is actually well-supplied; crude inventories are very high,'' he said. ''So while this won't have any immediate impact on U.S. supplies, the market is in very high anxiety. So any significant disruption, traders will take that into account, even though there is no threat of a supply shortage.''
Light, sweet crude for September delivery was up 36 cents to $74.95 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange.
Malone said the field will not resume operating until the company and government regulators are satisfied it can run safely without threatening the environment.
Officials at BP, a unit of the London-based company BP PLC, learned Friday that data from an internal sensing device found 16 anomalies in 12 locations in an oil transit line on the eastern side of the field. Follow-up inspections found ''corrosion-related wall thinning appeared to exceed BP criteria for continued operation,'' the company said in a release.
Steve Marshall, president of BP Exploration Alaska, Inc., said at an Anchorage news conference that testing in the 16 areas found losses in wall thickness of between 70 and 81 percent. Repair or replacement is required if there is over an 80 percent loss.
''The results were absolutely unexpected,'' he said.
Marshall said Sunday night that the eastern side of Prudhoe Bay would be shut down first, an operation anticipated to take 24 to 36 hours. The company will then move to shut down the west side, a move that could close more than 1,000 Prudhoe Bay wells.
Marshall said BP is looking at repairing, bypassing or totally replacing the line.
Only one of BP's three transit lines is operating. The third was shut down in March after up to 267,000 gallons of oil spilled. BP installed a bypass on that line in April with plans to replace the pipe.
While they suspect corrosion in both damaged lines, they can't say for sure until further tests are complete. Corrosion is primarily caused by carbon dioxide that comes up with water, oil and gas during drilling.
BP puts millions of gallons of corrosion inhibitor into the Prudhoe Bay lines each year. It also examines pipes by taking X-rays and ultrasound images.
''Up until Friday of this weekend we were of the opinion the techniques we were using were ultimately reliable,'' Marshall said.
Workers also found a small spill, estimated to be about 4 to 5 barrels. A barrel contains 42 gallons of crude oil. The spill has been contained and clean up efforts are under way, BP said. ''Our production while all this is in place is going to be marginal,'' said Will Vandergriff, spokesman for Gov. Frank Murkowski. ''That presents some technical problems because it's a high capacity line and it's meant to be filled.''
Vandergriff said he did not know exactly what potential problems a sudden drop in oil flow might cause the pipeline. Alyeska Pipeline Co. officials could not immediately be reached for comment.
A prolonged shutdown would be a major blow to domestic oil production, but even a short one could be crippling to Alaska's economy.
According to forecast figures from the Alaska Department of Revenue, a 400,000 barrels of oil per day production drop would mean approximately $4.6 million per day lost to the state. That is money going to both the state treasury and the state's oil wealth savings account, the Alaska Permanent Fund.
''That starts adding up to big bucks in a hurry,'' said House Finance Co-Chairman Mike Chenault, R-Nikiski. ''It could start having a disastrous effect on the state as early as today.''
BP said it was sending additional resources from across the state and North America to hasten the inspection of the remaining transit lines. About 40 percent of the lines have been inspected.
BP previously said it would replace a 3-mile segment of pipeline following inspections conducted after up to 267,000 gallons of oil spilled onto the frozen ground about 250 miles above the Arctic Circle in March.
House Speaker John Harris said it was admirable that BP took immediate action, although it's sure to hurt state coffers.
''This state cannot afford to have another Exxon Valdez,'' said Harris, R-Valdez.
The Exxon Valdez tanker emptied 11 million gallons of crude oil into Prince William Sound in 1989, killing hundreds of thousands of birds and marine animals and soiling more than 1,200 miles of rocky beach in nation's largest oil spill. |
|
|
| fjwagner |
quote:
Originally posted by rocky
Those gas gougers aka the oil companies are going to take advantage of th e loss of 8% of US production caused by the closure of a major section of the BP/Amoco alaska pipeline due to corrosion.
Funny how prices in the UK for gas have not risen since Katrinia yet ours have gone up so much......
F-.
Your logic is flawed. One, our damaged refineries did not supply the UK, so their prices did not reflect our loss of refinery capacity in the US. We are at a fine balance between supply and refinery capacity, thus any domestic loss of volumes that large (Alaska) has to have an impact at the pump. Economics 101. Every time Congress investigates price gouging, it isnt found except for some small isolated cases. Our insatiable appetite for oil to drive the Suburbans and pick ups is coming to roost. China, India and SE Asia demand is skyrocketing, the time from discovery to prodution is longer due to the complexity of the new fields (deep deep water) all lead to a new economic environment. Fred |
|
|
| rocky |
quote:
Originally posted by fjwagner
Your logic is flawed. One, our damaged refineries did not supply the UK, so their prices did not reflect our loss of refinery capacity in the US. We are at a fine balance between supply and refinery capacity, thus any domestic loss of volumes that large (Alaska) has to have an impact at the pump. Economics 101. Fred
Fred, you seem to have forgotten that the oil companies here have failed to invest in refining capacity pushing up prices.
We are a importer of oil, with inadequate infrastructure to ensure supply while demand increases. |
|
|
| fjwagner |
quote:
Originally posted by rocky
Fred, you seem to have forgotten that the oil companies here have failed to invest in refining capacity pushing up prices.
We are a importer of oil, with inadequate infrastructure to ensure supply while demand increases.
You can look to State and Fed regulations; especially California as severely curtailing the ability to build new refineries. Thus, the refiners are faced with expanding existing ones which has been and is happening. Our govt energy policies have not only hindered expansion of capacity, but have limited the companies ability to explore in our own backyard. Alaska, Eastern Gulf, offshore California. |
|
|
| fjwagner |
| The following chart shows the refining growth through 2004. could not find thru 2006 quickly. Also shows the number of refineries in total being reduced as many of those were old, inefficient and uneconomic. Given the red tape and 5-10 year time frame to build a new mega refinery, expansion is by far the most efficient approach. Fred |
|
|
| ramirami |
| BP should be fined heavily for neglect in this case. |
|
|
| fjwagner |
quote:
Originally posted by ramirami
BP should be fined heavily for neglect in this case.
I believe this line was operated by Arco before BP bought them out. Nonetheless, it does not appear that BP was on top of their corrosion control and evaluation. They have been operating the line long enough to have done adequate inspections before. This should be a clean oil line, so question is ow much water is actually flowing through that line post-separation. There are lots of questions to be answered for sure. Why it happened, why it was not identified earlier, why was there an inadequate evaluation program, etc etc. |
|
|
| dragoncoach |
| I don't know how you can be mad at BP. They only made about 45 BILLION so far this year and they said they were SORRY about having to close down their sub par maintained oil lines. Just think, when they reopen the pipeline, gasoline prices will be $4.00/ gallon and they will be able to post more record profits. Maybe we should all buy BP stock....... |
|
|
| N_Jay |
| I'm pissed at all the Greenies and others who convinced BP management (through their influence of public opinion and media attention) that they should be investing in things like "alternative energy" rather than sticking to their core business. |
|
|
| 5Gs |
quote:
Originally posted by fjwagner
I believe this line was operated by Arco before BP bought them out. Nonetheless, it does not appear that BP was not on top of their corrosion control and evaluation. They have been operating the line long enough to have done adequate inspections before. This should be a clean oil line, so question is ow much water is actually flowing through that line post-separation. There are lots of questions to be answered for sure. Why it happened, why it was not identified earlier, why was there an inadequate evaluation program, etc etc.
from what I've read, bp was not inspecting their lines on a regular basis. it was only after the transportation department ordered the inspection that bp discovered the problems. seems like that's the answer to why it wasn't identifed earlier. |
|
|
| fjwagner |
quote:
Originally posted by 5Gs
from what I've read, bp was not inspecting their lines on a regular basis. it was only after the transportation department ordered the inspection that bp discovered the problems. seems like that's the answer to why it wasn't identifed earlier.
I work for a major oil company and our integrity systems are far more advanced than BP's. We have been on BP for quite some time to shore up their operations where we are partners in fields that they operate. Not that we all dont have room for improvement, but we are constantly upgrading our systems and processes to minimize the chances of major issues happening. |
|
|
| ramirami |
quote:
Originally posted by N_Jay
I'm pissed at all the Greenies and others who convinced BP management (through their influence of public opinion and media attention) that they should be investing in things like "alternative energy" rather than sticking to their core business.
now the greenies are to blame for the mismanagement... (aah the independent mind) |
|
|
| fjwagner |
quote:
Originally posted by ramirami
now the greenies are to blame for the mismanagement... (aah the independent mind)
No, BP tries to make themselves look good with their green advertising campaign. However, the other majors have similar initiatives going on but focus on their core business better and dont feel a strong need to put out pretty ads like BP. Bottom line, hydrocarbons are here to stay and that is where the focus needs to be. A long time before alternatives can be main stream, so in the meantime Production Operations and Exploration need to be at the center of a major's effort. |
|
|
| N_Jay |
quote:
Originally posted by ramirami
now the greenies are to blame for the mismanagement... (aah the independent mind)
No I blame management for mismanagement.
I blame the greenies AND OTHERS for setting up the distracting media environment. |
|
|
| fjwagner |
quote:
Originally posted by N_Jay
No I blame management for mismanagement.
I blame the greenies AND OTHERS for setting up the distracting media environment.
Very True and well said. Fred |
|
|
| john802 |
quote:
Originally posted by rocky
Fred, you seem to have forgotten that the oil companies here have failed to invest in refining capacity pushing up prices.
We are a importer of oil, with inadequate infrastructure to ensure supply while demand increases.
The last time the US govt/State govt.. issued a permit for a new refinery was in the late '70. You can only increase capacity of existing refinery to a certain point due to technology improvement. We lost almost half of our refinery in the last 3 decades & yet our oil consumption increases during that time period. |
|
|
| fjwagner |
quote:
Originally posted by john802
The last time the US govt/State govt.. issued a permit for a new refinery was in the late '70. You can only increase capacity of existing refinery to a certain point due to technology improvement. We lost almost half of our refinery in the last 3 decades & yet our oil consumption increases during that time period.
Maybe you can get your California buddies to expedite and simplify the ability to permit and also to allow offshore exploration. California is a "not on our beach" state. Let them do it in Texas. Shouldnt work that way. |
|
|
| ramirami |
quote:
Originally posted by N_Jay
No I blame management for mismanagement.
I blame the greenies AND OTHERS for setting up the distracting media environment.
still not sure what you are trying to say... somehow greenies are to blame for the mismanagement :confused:
guess greenies are to blame for everything in your world |
|
|
| john802 |
| I blame the greenies, politicians & the California coastal commission for not opening the California coast for offshore oil exploration. We will always be beholden to the Middle East oil volatility unless we can come up w/ comprehensive energy policy: investing in alternative fuel technology; mandatory higher fuel efficiency on all new cars & trucks; opening our land/coastline for limited oil exploration; allowing oil companies to build new refineries. |
|
|
| N_Jay |
quote:
Originally posted by ramirami
still not sure what you are trying to say... somehow greenies are to blame for the mismanagement :confused:
guess greenies are to blame for everything in your world
Just one more case of a company trying to do what those who don't like what it is doing want it to do, instead of doing what it should be doing.
Sorry, if you can't see what I am saying but maybe my opinion takes the experience of being in the room while Sr. managers make really bad decisions because of outside media "noise". |
|
|
| Bill Balmer |
I see what you're saying, N_Jay, but ultimately the mangement is responsible. That's where the buck stops. Blaming the "distracting media environment" is like blaming the provocatively dressed woman for her own rape. And with the profits they've been showing, there's no reason they couldn't have been responsible to their base and pleased the greenies at the same time.
On a different note, a serious (though possibly very naive) question for my own edification: I understand that BP owns the pipeline, and Exxon/Mobil and Arco/Phillips own about 60% of the product that flows through it. If there are other companies out there with no interest in oil from this line, what's to keep them from undercutting their gas prices based on a more stable, higher volume of product? In other words, why is this line shut-down expected to affect gas prices for everyone - even those companies that don't get oil from this line? Overall demand should remain stable. Rather than increasing prices to control some imagined demand crisis, the companies with the uninterrupted supply should simply enjoy their increased profits by delivering more product to cover the shift in demand away from BP, Mobil, and Arco. No?:confused: |
|
|
| fjwagner |
quote:
Originally posted by Bill Balmer
IOn a different note, a serious (though possibly very naive) question for my own edification: I understand that BP owns the pipeline, and Exxon/Mobil and Arco/Phillips own about 60% of the product that flows through it. If there are other companies out there with no interest in oil from this line, what's to keep them from undercutting their gas prices based on a more stable, higher volume of product? In other words, why is this line shut-down expected to affect gas prices for everyone - even those companies that don't get oil from this line? Overall demand should remain stable. Rather than increasing prices to control some imagined demand crisis, the companies with the uninterrupted supply should simply enjoy their increased profits by delivering more product to cover the shift in demand away from BP, Mobil, and Arco. No?:confused:
The market is much more transparent than that. Refineries buy their crude from multiple sources and not necessarily even their own produced crude. I believe most of the Prudhoe crude goes to West Coast refineries. So even companies with no ownership of Prudhoe oil may be buying that oil for their own refineries. They are now forced to look for other sources. When crude is taken off the market, it affects everyone since there is less crude available to purchase in a competitive environment. Hence price goes up. |
|
|
| john802 |
quote:
Originally posted by fjwagner
The market is much more transparent than that. Refineries buy their crude from multiple sources and not necessarily even their own produced crude. I believe most of the Prudhoe crude goes to West Coast refineries. So even companies with no ownership of Prudhoe oil may be buying that oil for their own refineries. They are now forced to look for other sources. When crude is taken off the market, it affects everyone since there is less crude available to purchase in a competitive environment. Hence price goes up.
That's true. The best thing to increase the supply of oil to the market is for the allotment of oil that goes to the petroleum reserve be suspended or cut in half. |
|
|
| Bill Balmer |
| Thanks for the explanation. I figured there was more to it. So oil and gas companies buy crude from one another, which they then refine into gasoline and other products? Why support your competition? Capacity? |
|
|
| ramirami |
quote:
Originally posted by Bill Balmer
Thanks for the explanation. I figured there was more to it. So oil and gas companies buy crude from one another, which they then refine into gasoline and other products? Why support your competition? Capacity?
is'nt that how all utility comanies are... gas, electricity etc |
|
|
| rockman19762001 |
| If memory serves me I worked for Phillips Petroleum for 15 years before I retired in 1995. The Prudhoe Bay Pipeline oil, 60-65% of the capacity went to the West Coast, and the remaining 40-35% of capacity was shipped to the Asia market. What keeps gasoline prices high on the West Coast use to be and probably still are: 1) limited Refinery Capacity to use anything but sweet crude oil, oil that has hydrogen sulfide is classified as sour crude and is harder to refine. 2) No, pipeline system to ship crude oil from the Southwest Oil fields (Texas, New Mexico, Oklahoma). 3) limited use of Saudi Arabia Crude that is usually more sour than sweet. That the big ones I can remember. Arco's interest was bought by Phillips Petroleum several years ago, Phillips then merged with Conoco. |
|
|
|
