BP seek to restart part of Prudhoe Bay pipeline

Oil giant BP will this week conduct safety tests and seek government permission to restart part of the eastern Prudhoe Bay oil field pipeline in Alaska that was shut due to corrosion, the company told Congress today.

A restart will allow BP to "quickly" conduct maintenance of the pipeline and use a "smart pig" robot device to check the interior of the line, Robert Malone, chairman and president of BP's US unit, said during testimony at a Senate Energy Committee hearing.

The company will ask the US Transportation Department for the OK to restart part of the pipeline if it passes the tests, Malone said.

When the company wins approval, it can resume production from flow stations 1 and 3 on the eastern pipeline, Malone said. After the restart, if inspection results show these line segments "are not fit for service" then bypass pipelines to move the crude "will be completed as soon as practicable," he said.

Malone said the company hopes to have the field back at its full 400,000 barrels-per-day production capacity by the end of October. The western side of Prudhoe Bay is now pumping about 250,000 barrels a day.

US oil prices soared to near US$78 ($123.14) a barrel when the company announced in early August it was shutting the entire field, equal to 8 per cent of domestic crude production, due to the corroded pipeline that carried the crude.

Sen. Pete Domenici of New Mexico, chairman of the energy committee, said BP's failure to maintain adequately the pipeline that eventually resulted in oil leaking was "inexcusable."

"This is a black eye on BP," Domenici said. He said the costs BP has incurred from a bad public image and the loss of goodwill with consumers is far greater than the expense to ensure the pipeline was operated safely.

Kentucky Senator Jim Bunning said the millions of dollars it would take to maintain the pipeline was "chicken feed" compared with the billions of dollars in record profits BP has earned off high petrol and crude oil prices.

Bunning also questioned whether BP timed the shutdown of Prudhoe Bay oil field in order to maximize profits. He pointed out that BP has already been charged by federal regulators with manipulating propane markets and the company is also under investigation for possible manipulation of petrol markets.

Malone told lawmakers BP did not try to make money off the Prudhoe Bay shutdown and the company did not carry out any improper energy trading around the move. "I can assure you that my decision (to shut the line) was made around the integrity of that pipeline and to prevent a spill," he said.

Malone admitted the company "has fallen short of the high standards we hold ourselves, and the expectations that others have for us."

BP's actions have prompted many environmental groups to question whether other oil companies can be trusted to drill for oil and natural gas in new areas in Alaska.

Domenici said the oil industry needs to "reinstate the credibility" it had to operate in Alaska or votes will be lost in Congress to open the Arctic National Wildlife Refuge to drilling.

Federal regulators said BP's actions at the Prudhoe Bay pipeline appear to be isolated.

Thomas Barrett, who heads the Transportation Department's Pipeline and Hazardous Materials Safety Administration, said his agency does not see the weak maintenance at BP replicated at other pipelines on Alaska's North Slope.

On a positive note, partial shutdown of the giant Prudhoe Bay oil field has not caused any "significant impact" on the amount of crude processed at West Coast refineries that normally depend on Alaskan oil, the Energy Information Administration told lawmakers.

EIA Deputy Administrator Howard Gruenspecht said large US oil inventories have helped the country avoid any major supply problems due to the loss of some Prudhoe Bay crude.

- REUTERS