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Financial Times: BP further cuts Prudhoe Bay output

By Sheila McNulty in Houston

Published: August 24 2006 05:10 | Last updated: August 24 2006 05:10

BP, the UK oil giant, was forced to further reduce production from its Alaskan oil field on Wednesday, after it had to shut down a gathering centre due to a mechanical failure in a compressor.

That cut daily production from 200,000 barrels to 110,000 barrels, which is likely to have repercussions in the tightly-balanced oil market, which was rattled when BP last cut production from the field.

BP normally produces 400,000 barrels per day at the Prudhoe Bay oil field, but was forced several weeks ago to shut half the production after discovering ”severe corrosion” in an oil transit line.

In addition to the compressor problems, Daren Beaudo, BP spokesman, said BP had been forced to stop stripping insulation off one of its transit lines, as part of a weeks-long search for further corrosion, after discovering the material contained asbestos. The insulation, applied some 30 years ago when Prudhoe Bay first began production, is found to contain mastic, which contains 5 to 10 per cent asbestos.

Mr Beaudo said BP tested insulation samples after an expert suspected presence of asbestos, and the tests came back positive. He said the asbestos was tightly bound and not the type to easily release airborne fibres. But the company had, nonetheless, stopped the removal of insulation while it investigated if additional protective gear was needed for the workers.

Regulators had ordered BP to perform the corrosion checks after a massive spill in March at Prudhoe Bay from a corroded pipeline.

Mr Beaudo said there were no related safety issues with regard to the mechanical failure in the compressor, but the compressor handles gas and, without it, BP cannot produce oil. Mr Beaudo suspected it would take several days to complete the repairs.

The additional problems at Prudhoe Bay come while a grand jury is investigating whether to bring criminal charges against the company.

BP’s Alaska problems followed a fatal explosion last year at its Texas City refinery, which also is under grand jury investigation. These major incidents, along with a string of smaller incidents in the company’s US operations, have raised questions about BP’s safety culture.

The company insists the incidents are not reflective of a broader problem, but it recently appointed Bob Malone as the new president of BP’s Americas operations to work to improve the US safety record.

Copyright The Financial Times Limited 2006

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