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Associated Press: Questions Raised Over Aging Oil Fields

By MARY PEMBERTON
Associated Press Writer
Aug 9, 2:20 AM EDT
 
ANCHORAGE, Alaska (AP) — BP’s problem of corroding pipes is worsening as the nation’s largest oil field ages and more water and less oil is produced during drilling.

“Really, we are a giant water field,” said Bill Hedges, BP PLC’s corrosion expert, explaining that what comes up now during drilling is three-quarters water.

Water contains carbon dioxide, ideally suited to corroding pipelines.

The shutdown this week of the Prudhoe Bay oil field because of severe corrosion found in transit lines is raising questions about the condition of the rest of the field. Oil first flowed at Prudhoe Bay on June 20, 1977.
 
The Prudhoe Bay oilfield, which accounts for 8 percent of domestic output, is very different now from what it was when it was first brought onstream, said ING Financial Markets analyst Jason Kenney.

“The changing quality of the crude that is being produced has presented an issue with the infrastructure that’s in place and the development and that is what BP are battling against,” Kenney said.

The world’s second-largest oil company announced Sunday it was shutting down the oil field after a small leak was found in one of its three transit lines, which bring oil to the 800-mile trans-Alaska pipeline. BP has 22 miles of transit lines and will be replacing two of the lines, or 16 miles of pipe.

The Prudhoe Bay field produces about 400,000 barrels a day – about half of all North Slope production – with production divided equally between the eastern and western sides.

A Diminished Supply of Oil 
 
The phased shutdown began Sunday on the east side, where the leak was discovered. It will likely move to the west side, where in March corrosion in another transit line caused a spill of up to 270,000 gallons – the biggest spill in the history of the North Slope or portion of Alaska north of the Brooks Range mountains.

Company officials said Tuesday they hope to avoid a complete shutdown on the west side.

Bob Malone, chairman of BP North America who took over July 1, defended the company Tuesday.

“I’m not able to see a systemic issue,” Malone told analysts. “These are very, very unfortunate incidents. I can say with comfort I’m seeing a high level of focus on safety and operation integrity.”

The discovery of the corroded pipe is not the first major problem at Prudhoe Bay – BP is already facing a criminal investigation over a March spill of up to 270,000 gallons on the west side of the field. Both spills are being blamed on corroded transit pipes.

BP is spending $72 million this year on its anticorrosion program, with about half that money going for millions of gallons of corrosion inhibiting chemicals placed in the pipelines. The amount of inhibitor is roughly double what it was a decade ago.

The company uses a variety of techniques to detect corrosion, including X-raying the pipe and gauging thickness by ultrasound. Workers place gel on sections of pipe and move a transducer along it to detect thin spots. More than 100,000 points along roughly more than 1,000 miles of Prudhoe Bay pipe are checked annually.

Flow pipes – the ones that carry oil, water and gas – also are cleaned and scraped and “smart pigged,” where an ultrasound device is put into the pipe to check for the thin places in the wall of the pipe.

It was that test, ordered by the Federal Department of Transportation following the huge March spill, that revealed problems in the transit line that leaked Sunday.

BP had relied mostly on exterior ultrasound to monitor the integrity of its three transit pipes in the belief that they were low-risk for corrosion because they carried market-ready crude oil, the processed oil with the water, gas, and solids removed.

On any given day, between 60 and 70 workers are doing tests on Prudhoe Bay’s aging pipeline system, Hedges said.

BP now says it will use a maintenance pig to scrape and smart pig all its transit lines.

CSFB analyst Edward Westlake said the outage in Alaska confirms that some non-OPEC production infrastructure is becoming old.

“These are not new fears,” he said. “However, they are causing more concern to company managements.”

Sen. Charles Schumer, D-N.Y., said Tuesday that the corrosion in the Alaska pipeline could indicate other trouble in the U.S. system. He called on the Transportation Department to immediately survey the nation’s pipeline network.

He urged the federal government to be more aggressive in seeking out and correcting flaws in the U.S. energy infrastructure.

“The bottom line is we cannot afford for this incident to be a canary in the mineshaft,” Schumer said. “Now is the time to aggressively search for and fix any other problems before another disruption causes a national energy emergency.”

Schumer said officials should review the inspection schedules companies file to determine whether pipeline operators are adhering to their required plans.

BP has said it determines how often to test its pipes depending on the particularities of the pipe and if it is likely to corrode.

The severe corrosion found in the pipe that leaked Sunday was a surprise.

“Others with operations with mature assets would no doubt be checking procedures for own infrastructure integrity,” Kenney said.

Thomas J. Barrett, administrator of the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, said his office has issued BP several compliance orders since the March 2 spill and will issue several more when the current onsite investigations are complete.

“Our goal is to restore the safe operations up there as quickly as we can. BP is doing the types of things we would like to have seen done sooner,” he said.

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Associated Press Writers Steve Quinn in Dallas and Jane Wardell in London contributed to this report.

© 2006 The Associated Press. All rights reserved.

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