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BP shutting down major British oil pipeline

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Reuters: BP shutting down major British oil pipeline

Sat Apr 26, 2008 7:41pm EDT
By Jeremy Lovell

LONDON (Reuters) – A pipeline carrying nearly half of Britain’s oil was being shut down late on Saturday ahead of a strike over pensions that has already closed a major refinery and prompted some panic fuel buying.

The Grangemouth refinery in Scotland produces a tenth of Britain’s petrol and diesel but also provides the steam that allows the neighboring Kinneil plant to begin processing the crude oil coming ashore from 70 fields in the North Sea.

Without that heat which starts the basic distillation process separating gas from heating oil and everything in between Kinneil cannot function and the flow ceases.

In preparation, for the complete shutdown which will coincide with the start of the two-day strike starting at 0600 BST (0500 GMT) on Sunday several North Sea fields began to cut production on Friday.

“The shutdown is now underway. It should be completed by six am tomorrow,” a spokesman for operator BP (BP.L: Quote, Profile, Research) said.

The strike is the first to close a British refinery in more than 70 years.

The Forties pipeline carries an average of 700,000 barrels per day (bpd), close to half the 1.5 million barrels the country produces daily. One fifth of Britain’s gas supply also relies on the Forties system.

The Forties oil alone is worth 50 million pounds ($100 million) a day and the pipeline’s closure for the two-day strike will make a significant dent in already stretched government coffers which take half of the revenues in tax.

Management at the 200,000 bpd refinery, owned by international chemical company Ineos, met officials of the UNITE union on Saturday but failed to get a deal that would allow the pipeline to continue operating.

“We will provide full safety cover over the two days so the refinery can be fired up quickly after the strike but the Kinneil plant will not be treated any differently from any other facility on the site,” a union spokesman said after the meeting.

He said no further meetings were planned with management.

On Saturday industry lobby group Oil & Gas UK urged the government to intervene to make sure North Sea oil kept flowing.

“It is now time for the UK Government at the highest level to step in and take all the necessary actions to ensure that the country is not held to ransom in this manner,” said chief executive Malcolm Webb.

“This is now affecting some 80 companies and their operations which are in no way connected to or involved in this dispute. The impact … goes way beyond Ineos and UNITE’s immediate differences and is wholly disproportionate,” he added.

The government says there will be no overall shortages of fuel but accepts that there may be some local supply problems, particularly in Scotland and northern England.

“There is plenty of petrol and diesel in Scotland to meet demand during this period of time. But of course that is going to be challenged if people change the way that they consume fuel,” Industry Minister John Hutton said.

BP said that assuming it got power back as soon as the strike ended and Forties fields resumed production rapidly, the pipeline could be back in operation within 24 hours but might take a few more days to get back to full flow.

Ineos said on Friday that it had completed the shutdown at Grangemouth.

Talks to resolve the dispute collapsed on Wednesday.

European diesel prices have shot up this week on worries about a fuel shortage.

British gas prices have also jumped although the National Grid gas supply network said it did not expect gas shortages as warm spring weather has curbed demand.

(Additional reporting by Daniel Fineren, Margaret Orgill and Avril Ormsby; Editing by Giles Elgood)

© Thomson Reuters 2008 All rights reserved

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