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The Wall Street Journal: ‘Smart Pig’ Hogs Spotlight as BP Closes Oil Field

EXTRACT: A division of Royal Dutch Shell PLC is credited with inventing the technology, which was licensed to Tuboscope Inc., an early maker of smart pigs.

THE ARTICLE

By ANNA RAFF
August 11, 2006; Page A2

If there is one lesson BP PLC should take away from the Prudhoe Bay debacle, it is this: Never doubt the “smart pig.”

The so-called smart pig has taken center stage as the energy company, based in London and the operator of Prudhoe Bay, grapples with oil-pipeline corrosion that forced it to begin a shutdown of the huge Alaska deposit, the largest-producing oil field in the U.S.

Unlike pigs on the prowl for truffles, an oil-industry pig is a droid, usually shaped as a cylinder, which is pushed through a pipeline. Utility, or “clean,” pigs are used to scrape and move debris, while “smart” pigs use magnetic fields or ultrasonic technology to detect corrosion.

“The unexpected results of this most recent smart-pig run have called into question the condition of the oil-transit lines at Prudhoe Bay,” BP America President Robert Malone said this week in a news release.

BP said Sunday it was shutting down its Prudhoe Bay oil field in Alaska after the discovery of a corroded pipeline and small leak there, following a run by a smart pig in late July. The shutdown could take 400,000 barrels a day of crude-oil production off world markets if BP follows through with a closure of the entire field. About half of its production has been shut off.

The problem has roiled oil markets and amplified concerns about supply, although yesterday BP said it purchased a large amount of crude from the open market in recent days to feed its West Coast refineries.

The problem has also increased scrutiny of BP’s management of its North American operations. Late yesterday the Transportation Department’s pipeline-safety agency ordered BP to make additional inspections of its entire North Slope pipeline network, including four daily surveys of all its low-pressure lines there. Lawmakers are also set to hold hearings on the issue.

Utility pigs have been around since the advent of oil pipelines in the late 1880s, said Jack Smart, a Houston technical consultant to the Pigging Products & Services Association. The original pigs were burlap sacks wrapped with barbed wire, which emitted a squealing sound when scraping against the inside of the pipeline.

“The story goes that two workers were standing next to each other after sending it through the pipeline, and one says to the other, ‘Gosh, that sounds like a pig,’ ” Mr. Smart said. “The name just kind of stuck.”

It also has morphed into a verb: to pig. But pigs aren’t called pigs everywhere. In many countries, references to pigs are considered insulting. So, in Saudi Arabia, “pigs” are called “scrapers.” In Mexico, they are called “diablos,” or devils.

Pigs no longer squeal, and nowadays, the smart ones are loaded with sensory devices that can process data showing the corrosion along intervals as small as one-tenth of an inch along a pipeline.

“I can see how the rest of the world finds it funny,” said Clay Williams, chief financial officer at National Oilwell Varco Inc., an oil-services company in Houston, referring to the oil industry’s use of such animate terminology. “We’re just used to it. An operative noun and an operative verb. It’s a business.”

A division of Royal Dutch Shell PLC is credited with inventing the technology, which was licensed to Tuboscope Inc., an early maker of smart pigs.

A top-of-the-line smart pig can cost a million dollars, said Mr. Williams, who worked at Tuboscope before it merged with Varco and then, later, National Oilwell. He estimates the value of pigging services conducted globally at hundreds of millions of dollars a year.

Some pipelines, especially older ones, aren’t “piggable” because turns in some sections may be too sharp for the smart pig to navigate.

Because the Prudhoe Bay transit lines in question are aboveground, BP used ultrasonic testing to detect corrosion. This testing method failed to find severe loss of material in the walls of the 29-year-old system.

There was an attempt to pig part of the pipeline in the early 1990s, but at the time, a buildup of calcium carbonate on the inside walls prevented the pig’s sensors from picking up abnormalities.

“The pigging was discontinued throughout the 1990s and indeed into this decade,” Steve Marshall, head of BP Exploration Alaska, said on a conference call with investors this week.

Mr. Marshall indicated that BP has learned to embrace the pig. “Looking forward, our corrosion-mitigation inspection programs…will very strongly feature routine maintenance pigging to the maximum frequency that we need,” he said.

Meanwhile, one of BP’s principal partners in Prudhoe Bay, ConocoPhillips, said it was resorting to force majeure on deliveries of crude from the Alaskan field. Force majeure is a contract clause that frees one or both parties from liability when an event outside of its control takes place. Conoco is trying to minimize delay or disruption of shipments, company spokesman Bill Tanner said.

A spokesperson for Exxon Mobil Corp., the other partner in the project, said it was “too premature to discuss force majeure.”

BP said it isn’t declaring force majeure because its portion of crude goes primarily to its own refineries. BP owns about 26% of the field

BP also confirmed it has purchased more than 3.5 million barrels of crude to meet the needs of its West Coast refineries and marketing operations during the short and medium term. That is good news for consumers on the West Coast, where refineries process Alaskan crude into fuels like gasoline.

—- Jessica Resnick-Ault and Brian Baskin contributed to this article.

Write to Anna Raff at [email protected]

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