ANCHORAGE, Alaska – BP said Thursday it had signed two major deals to supply new pipe for approximately 10 of the 16 miles of an Alaskan oil pipeline it was forced to begin shutting down early this week.
The discovery of leaks and severe corrosion in the pipeline has prompted a shutdown of the entire Prudhoe Bay oil field, the nation’s largest.
BP said it was producing approximately 120,000 barrels of oil per day from the site, down from about 400,000, as it works on the gradual shutdown. BP is simultaneously evaluating whether it can continue to supply the oil at a lower capacity during the repairs, and hopes to make a decision in the next few days.
BP PLC spokesman Scott Dean said that the company had signed contracts with United States Steel Corp. and Nippon Steel Corp. to supply the 10 miles of pipeline, and is working to win contracts for the remaining materials.
Dean said it was too early to say exactly how much the total project will cost, but insisted BP is not looking to pinch pennies.
“We are committed to sparing no expense to make this pipeline safe and reliable,” he said.
Separately, ConocoPhillips spokesman Bill Tanner said Thursday that his company had invoked a “force majeure” clause in the contracts it has with customers who receive oil from Prudhoe Bay. Such an action alerts those customers thatthe company may not be able to supply all the crude oil it has promised because of an unforeseen emergency, and allows them to seek out alternative sources.
BP said it had no similar plans because the oil it gets from Prudhoe Bay is processed by the company itself. Exxon Mobil said it was monitoring the situation.
BP, which operates the oil field, has not yet said exactly how it might divide costs with ConocoPhillips Co. and Exxon Mobil Corp., which also share ownership of the Prudhoe Bay site.
“We’re still working it out with the partners,” Dean said. “We’re the operator but everyone’s got a share in the field.”
Chuck Bradford, an analyst with Soleil Securities, which covers pipe companies, said the BP orders, while not huge, will nevertheless be a boon U.S. Steel and Nippon Steel.
Bradford said he also expects the pipeline shutdown to have a longer-term effect, because it may prompt others in the industry to rush to replace their decades-old pipeline, in the hopes of averting similar troubles.
“There’s just an awful lot of old pipe out there that needs to be replaced,” he said. “The problem’s going to be that nobody has the capacity to make the pipes. Everybody’s full.”
A burst of new orders could extend an already strong period for the steel pipe industry, he added.
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