BP Says It's Trying to Keep Alaska Oil Flowing

Oil major BP is searching for ways to keep some oil flowing from its giant field in Alaska, hit by severe pipeline corrosion that caused crude to leak onto the tundra, the company said on Tuesday.

BP (BP) on Sunday began turning off the taps from the Prudhoe Bay field, the largest in the United States, after finding a small spill. The move sent oil prices soaring over $77 a barrel and led world energy suppliers to offer extra crude shipments to ease a potential crunch.

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"We are having dialogue with those important stakeholders (federal and state regulators) to determine if there is an assurable safe method for maintaining some level of production," said BP spokesman Daren Beaudo.

The incident is the latest to hit BP's Alaskan operations, a cornerstone of its portfolio, and dealt another blow to the company's U.S. image following a deadly refinery explosion in Texas last year that killed 15 people.

The pipeline problem, which hit at the heart of the U.S. summer driving season, also threatens to send pump prices to new records above $3 a gallon.

Beaudo told Reuters that BP was studying ways to keep some production flowing from the western area of the Prudhoe Bay field, which has a capacity to produce 185,000 barrels per day, while the company replaces the corroded pipelines.

As of Tuesday afternoon, BP said it had shut in 200,000 barrels of production at Prudhoe Bay, up from 175,000 barrels earlier.

Bob Malone, the head of BP's operations in the United States, had said previously that the company would likely shut the entire 400,000 barrel per day field, and that it could be weeks or months before the production resumes.

Democratic members of the U.S. House of Representatives called on the U.S. Congress to hold hearings into BP's operations in Alaska following the incident, calling BP's management of the field "appalling."


If the field is completely shut, full production from Prudhoe Bay may not resume until January, according to the U.S. Energy Information Administration.

Energy analysts are concerned a prolonged shutdown of the field, which accounts for about 8 percent of U.S. domestic crude production, would cause a supply crunch that could force oil refiners to slow fuel output.

"The supply disruption in Prudhoe Bay is going to have serious ramifications for my constituents and all West coast consumers in the coming days and weeks," said U.S. Rep. Richard Pombo (news, bio, voting record), who heads the House Resources Committee.

West Coast refineries, which process about 2.7 million barrels per day of oil, will be most affected by the oil field shutdown, but the full impact of the supply cut is not likely to be felt for about two weeks, analysts said.

Some of the lost Alaskan oil production will be made up from inventories already in storage on the West Coast. The White House said on Tuesday that Saudi Arabia and Mexico had also pledged additional supplies.

BP has come under intense regulatory scrutiny since a pipeline leak of at least 200,000 gallons of oil in March, the worst onshore spill recorded in the area.

U.S. Department of Transportation pipeline inspectors headed to Prudhoe Bay on Monday to assess the extent of the corrosion problems.

The federal government said in June it would permit BP to keep operating its oil pipelines in Alaska in spite of the company's inability to perform special internal corrosion detection operations. But it warned it could order the field shut if additional tests showed a risk of further leaks.

BP pledged last month to spend an extra $1 billion on top of the $6 billion it has earmarked for upgrading safety at its U.S. refineries and to repair and replace Alaskan pipelines.

London Brent crude oil hit a record of $78.65 a barrel in intraday trade before settling 75 cents lower at $77.55 a barrel. U.S. crude settled down 67 cents at $76.31 a barrel.

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