Bad news for gas prices?

[luv-em-n-lv-em]

http://www.forbes.com/technology/feeds/ap/2006/08/06/ap2930443.html

Excerpt:

Half the oil 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 day, 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.​

 

[Smother]

inventories...according to the last supply report show's that North America is well supplied in terms of Oil.....
This, however, could lift oil because of the uncertainty...
If this becomes a prolonged issue......and leads into the Hurricane season....along with the Middle East tension....well.....Oil could surge well above ....and I mean well above $80 a barrel !!!!
Good for my Oil stocks.....Bad for the Economy!!

 

[sdw]

The BP issue was lack of inspection because inspection costs money. BP had one of their transit lines go with a spill of 267,000 gallons. This caused them to be required to inspect the other 2 transit lines. The inspection found 80% loss of wall thickness and a small spill of 5 barrels in progress. A total of 16 leaks were discovered.

BP is now required to bring down the East transit line which will take 3 days and then the West transit line which will take an additional 3 days. This means a reduction of 400,000 barrels a day in the available oil supply.

All 3 transit lines will have to be rebuilt. This will take at least a year.

The good thing is that they are being shut down and won't be spilling oil in anything like the Valdez disaster.

The 1500 or so wells will all be brought back on line once the transit lines have been rebuilt.

Just in case people don't know the difference between transit lines and pipelines.
Transit lines are the pipeline that collects the output from the wells. They suffer more corrosion because the raw product is a mixture of CO2, Oil, Natural Gas and Water.
Pipelines are the pipeline that carries product to the port or market.

 

[Lurker 123]

I wish Greater Vancouver can improve its public transist system.If I can take a public transist to and from work, then I would have less harrassment by those international oil companies. Those oil companies always make any sort excuse to jack up the oil price!

 

[gravitas]

<img src='http://img.villagephotos.com/p/2004-4/688404/gasprices2rx.jpg' width=175 height=184 >

 

[williewheeler]

Just in case people don't know the difference between transit lines and pipelines.
Transit lines are the pipeline that collects the output from the wells. They suffer more corrosion because the raw product is a mixture of CO2, Oil, Natural Gas and Water.
Pipelines are the pipeline that carries product to the port or market.

sdw, i gather you know something about the oil industry, particularly when it comes to corrosion. having worked for 18 years in the petrochemical industry (mostly refining, but production and other stuff too) as both an equipment inspector and corrosion engineer, i appreciated your explanation.

these transit lines were built, if memory serves, in the early '70s. in refineries, everything but rotating equipment is generally designed with a "life" of 20 years. i don't know how long the engineers thought the transit lines would last, but i don't think it comes as a surprise that they are shot and need replacing after 30 years. they either thought "if it ain't broke, don't fix it" or have spent the maintenance money on other things like dividends for shareholders or nice, fat bonuses for board members. i find the timing interesting as well - now that the summer driving season is almost at an end, we take production offline just at the time refiners are getting ready to switch production over to winter products like heating oil.

 

[FuZzYknUckLeS]

The shit jumped $2.50 U.S. today.
Prolly @ 80/barrel by weeks end.
Fuckers.

 

[wolverine]

The shit jumped $2.50 U.S. today.
Prolly @ 80/barrel by weeks end.
Fuckers.

Cool, more surplus money for us Albertans.

 

[sdw]

sdw, i gather you know something about the oil industry, particularly when it comes to corrosion. having worked for 18 years in the petrochemical industry (mostly refining, but production and other stuff too) as both an equipment inspector and corrosion engineer, i appreciated your explanation.

these transit lines were built, if memory serves, in the early '70s. in refineries, everything but rotating equipment is generally designed with a "life" of 20 years. i don't know how long the engineers thought the transit lines would last, but i don't think it comes as a surprise that they are shot and need replacing after 30 years. they either thought "if it ain't broke, don't fix it" or have spent the maintenance money on other things like dividends for shareholders or nice, fat bonuses for board members. i find the timing interesting as well - now that the summer driving season is almost at an end, we take production offline just at the time refiners are getting ready to switch production over to winter products like heating oil.

BP is rather famous for their maintenance schedules (or the lack of), BP has a couple of lawsuits on the go for wrongful death and pollution issues. This isn't BP's first major whoops and it won't be the last. The reason the entire field is shut down is that Alaska and the Feds know that's the only way to force the work done properly. After the spill of 267,000 gallons, BP didn't start work on repairs, they just put in bypass lines to try and keep going.

Most of the big energy, manufacturing and communications companies are shorting maintenance. This policy is forced on them by the mutual fund/pension shareholders who only look at share value and dividends.

This is the reason that portions of California and New York had 2 week long outages this summer. Some of the electrical grid is 75 and 80 years old. Even without the dimwits who steal cable and parts of the towers, some of the grid is corroded to the point that it is only hope holding it together.

Then, there are the American regulated Airlines. Ever wonder what happens to a airliner that isn't maintained? How about the "sunroof" model flown by Aloha, the Gimli Glider flown by Air Canada, the tailless models flown by Alaskan, the "added heat" model flown by American who contributed the most to the "tower models". If you fly, it's a good idea to stay on El Al, Pan Am or Westjet.

A good amount of what we count on in order to maintain our civilization is owned and operated by multinationals who are busily moving their base of operations.

 

[Smother]

The shit jumped $2.50 U.S. today.
Prolly @ 80/barrel by weeks end.
Fuckers.

$100 a barrel is just around the corner!!

I'll say that if Oil does hit $100 a barrel ....and I think it will.....and stay's up there for quite some time.....A recession will occur!!

 

[JustAGuy]

these transit lines were built, if memory serves, in the early '70s. in refineries, everything but rotating equipment is generally designed with a "life" of 20 years. i don't know how long the engineers thought the transit lines would last, but i don't think it comes as a surprise that they are shot and need replacing after 30 years. they either thought "if it ain't broke, don't fix it" or have spent the maintenance money on other things like dividends for shareholders or nice, fat bonuses for board members.

NBC News did a segment tonight that basically said exactly the same thing. BP had a huge spill five months ago that was attributed to "excessive corrosion". They knew very well the clock was ticking before they'd have to do some major maintenance on their equipment. It wouldn't surprise me if they're trying to cover up yet another leak with this shutdown. Sloppy maintenance practices are apparently a hallmark of BP and have been for many years.

 

[xmy556]

All this from a company that wants to brand itself "Beyond Petroleum", or so it tells NGO's and other stakeholders. Maybe they should just go "Backto Petroleum" and rebuild a bit of infrastructure.

 

[sdw]

NBC News did a segment tonight that basically said exactly the same thing. BP had a huge spill five months ago that was attributed to "excessive corrosion". They knew very well the clock was ticking before they'd have to do some major maintenance on their equipment. It wouldn't surprise me if they're trying to cover up yet another leak with this shutdown. Sloppy maintenance practices are apparently a hallmark of BP and have been for many years.

BP admited today that the last time they had put a pig (pipe inspection machine) through their transit lines was in 1992.