Shares in BP PLC (BP.LN) fell as much as 2% Monday after the U.K.-listed oil giant and other oil producers were forced to shut down some 600,000 barrels a day of output on Alaska's North Slope, following a leak that closed the Trans Alaska pipeline.
Shares in BP PLC (BP.LN) fell as much as 2% Monday
after the U.K.-listed oil giant and other oil producers were forced to shut
down some 600,000 barrels a day of output on
Alaska
's
North Slope
, following a leak that closed
the Trans Alaska pipeline.
Investors and analysts said the incident does not appear to be very serious,
but could cause problems for oil markets and BP, which has been weakened by the
Deepwater Horizon disaster, if the shutdown is prolonged.
Oil prices were up on the shutdown of the 800-mile pipeline network, which is
operated at arms length from BP by the Alyeska Pipeline Service Co. BP is the
largest shareholder in Alyeska with a 46.93% stake. ConocoPhillips (COP), Exxon
Mobil Corp. (XOM), Chevron Corp. (CVX) and Koch Industries are also
shareholders.
BP ships around 180,000 barrels a day of oil through the pipeline, less than a
third of the total, said a BP spokesman.
Despite the fact that BP doesn't have a direct role in day-to-day operation of
the Trans Alaska pipeline, news of the leak and shutdown comes at a bad time for
the company, which is still trying to recover from the Deepwater Horizon
drilling rig explosion last year that created a massive oil spill and
environmental disaster in the Gulf of Mexico.
The fragility of the company's recovery from the disaster was highlighted by
BP's new Chief Executive, Bob Dudley, in an email to employees in October.
"Every day we operate safely we earn more trust, but a single problem
could jeopardize the recovery,"
Dudley
wrote in an email to staff obtained by Dow Jones Newswires in October.
At 1522 GMT BP shares were down 1.2%, or 6 pence, at 487 pence recovering
slightly from earlier in the day when they were down 2.2%, or 11 pence, at 482
pence.
The production loss also pushed prices higher in a market where the balance between
supply and demand has looked increasingly tight in recent weeks. At 1420 GMT,
the price of a barrel of benchmark crude oil Brent was up $1.87 to $95.20.
A brief shutdown of the pipeline would not have serious consequences for oil
supplies. Analysts said there is little likelihood of severe oil shortages on
the West Coast. A large volume of crude oil is held in storage at the
Valdez
terminal in
Alaska
, and
refineries can buy more Middle Eastern, Russian and Latin American grades on
the spot market, they said.
If the pipeline is only shut down for a short period "it won't really have
any impact at the [BP] group level in terms of profit," said Colin Morton,
a fund manager at Rensburg Fund Management, which holds a stake in BP. The oil
BP ships through the pipeline is less than 5% the company's total output, he
said.
An extended pipeline outage at this time of year would be more serious. Restarting
production and pipeline operations after a lengthy outage during freezing
temperatures can be more difficult. When temperatures inside a pipeline drop
and the oil inside gets cold, it becomes waxy and gelatinous requiring special
measures to restart the flow.
The oil leak from the Trans Alaska pipeline isn't a very serious incident from
an environmental perspective, but it is attracting lots of attention because of
the spotlight on BP following the Deepwater Horizon explosion, said Morton. The
incident is an unwelcome reminder of the uncertainty that surrounds BP, he
said. "Sentiment toward the stock has improved...[but] we still can't say
with any absolute confidence that there isn't any more bad news to come,"
he said.
Alaska
has been a problematic venue for BP in recent years. The company has
been on probation for the past three years for its role in a 200,000 barrel oil
spill from a corroded pipeline in 2006 that was the worst in the history of the
North Slope
. The
company has suffered a number of other spills and pipeline ruptures in
Alaska
since
then.
Alyeska shut down the pipeline system early Saturday after workers discovered
oil leaking into a basement at a pump station on the
North Slope
. Alyeska then told BP and
other producers in the region to reduce their output by 95%.
Total production on the
North Slope
is around 630,000 barrels a day--about 9% of total domestic
U.S.
output.
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