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Trans-Alaska Pipeline System Leak Causes BP To Shutdown 95% Of Prudhoe Bay Production

Tyler Durden's picture


Is it about to be deja vu all over again? The FT reports that "oil markets were braced on Monday for the impact of the loss of up to 15 per cent of US crude after a pipeline leak forced BP, the UK-based oil company, to shut down 95 per cent of production from North America’s biggest field...The leak is in the Trans-Alaska Pipeline System, which carries 14-15 per cent of US crude oil production 800 miles to Valdez, where it is shipped out in tankers. It is the only line carrying oil to market from Prudhoe Bay." And yes: BP will be blamed again: "Prudhoe Bay is jointly owned by BP, with 26 per cent; ConocoPhillips, with 36 per cent; ExxonMobil, with 36 per cent; and others with 2 per cent. BP is the operator of the field." And just as the authorities had managed to put a temporary lid on oil prices: "The cause of the leak is being investigated by state and federal regulators, as well as the company itself, but if it is not fixed within a few days, the incident could put upward pressure on oil prices once more." Time to go through the list of all BP CDS counterparties all over again?

From the FT:

BP said it was working to shut down production, taking precautions to prevent the lines from freezing.

Alyeska, which is also the pipeline’s operator, said the leaked oil was discovered in the basement of a pump room. It said the leak was in piping encased in concrete and had to be excavated before it could be repaired.

The company added that it was considering a variety of options to restart the line as quickly as possible, including bypassing that section of piping.

A person involved in the situation said that the leak had not spilt out on to the tundra and would probably be fixed within the week.

The pipeline carried an average of 642,261 barrels per day in December, higher than the monthly average last year of 620,000 barrels.

The Marine Terminal at Valdez has 18 storage tanks, with total capacity of more than 9m barrels. But only 14 of those tanks are in operation. On Sunday morning, Alyeska said they still held 35 per cent of their inventory, or about 2.5m barrels of oil. There is no significant storage on site to make up for a prolonged outage.

In August 2006, BP had said it would shut the entire field after corrosion data and a leak indicated its pipelines were corroded. That information followed the biggest-ever leak at Prudhoe Bay in March of that year. In the end, it was only forced to shut half the field.


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Mon, 01/10/2011 - 08:00 | Link to Comment Sudden Debt
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Mon, 01/10/2011 - 08:07 | Link to Comment Confused
Confused's picture

Hahaha, brilliant! 


What a mess. 

Mon, 01/10/2011 - 08:11 | Link to Comment ColonelCooper
ColonelCooper's picture

"The leaked oil was discovered in the basement of a pump room."  This is only a mess if you are the janitor.

"The oil has not spilt onto the tundra."  Wake me up when they pressure the line back up.


Mon, 01/10/2011 - 08:31 | Link to Comment ColonelCooper
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Excellent vid, SD

Mon, 01/10/2011 - 08:29 | Link to Comment Confused
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Agreed.  I meant it more when viewed in the context of all the other nonsense that is going on.


Mon, 01/10/2011 - 08:36 | Link to Comment ColonelCooper
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Mon, 01/10/2011 - 17:24 | Link to Comment M4570D0N
M4570D0N's picture

Yep. It was only about a dozen barrels too.

Response crews have recovered nine to 10 barrels of oil from the basement of a booster pump building, about 90 percent, Alyeska Pipeline Service Co., the operator of the pipeline, said on Sunday.

Mon, 01/10/2011 - 10:29 | Link to Comment velobabe
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lost all my balls†

Mon, 01/10/2011 - 11:47 | Link to Comment TruthInSunshine
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In related news, Ben Bernanke was spotted by surveillance cameras all over the nation breaking into pipeline fields, and punching holes in the pipes, hell bent on getting any additional impetus of inflation he can... know, because inflation is way too low, and all:


Ben Bernanke: Inflation Levels Too low
Mon, 01/10/2011 - 08:12 | Link to Comment Salinger
Mon, 01/10/2011 - 08:13 | Link to Comment TheMadApe
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I blame the Canadians. They did it, under cover of darkness, wearing beaver costumes. Their M.O. is to make the Alberta Tar Sands look more appealing.

Mon, 01/10/2011 - 08:34 | Link to Comment DaBernank
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"blame Ca-na-da!"

WTI, bitchez...

Mon, 01/10/2011 - 10:02 | Link to Comment Arius
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scapegoting other countries is amerkans past time....its easy - even dummies get it...

Mon, 01/10/2011 - 10:29 | Link to Comment TheMadApe
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Yeah but I am Canadian so ya can't goes 'n blame the American's for this act of sabotage. It was the damn beavers I tell youse!

Mon, 01/10/2011 - 08:25 | Link to Comment Rusty Shorts
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Up next, leak fixed but the Pipeline froze, consumer punked again, LOL.

Mon, 01/10/2011 - 12:11 | Link to Comment CrazyCooter
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Well, in that even at least they could get a guiness record for the worldest longest tube of chapstic!


Mon, 01/10/2011 - 08:34 | Link to Comment Ruffcut
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Poor operation standards and corrosion monitoring.

BP is a classic fuck-up. Maybe they should get banking status. 

Mon, 01/10/2011 - 08:42 | Link to Comment ColonelCooper
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"Poor operation standards and corrosion monitoring."

You're half right.  Their corrosion monitoring is fine.  It's their poor operations standard and resulting inaction that's the issue.  However, in this case, it's a contained leak in a pump room.  This seriously needs to be chalked up to "shit happens". 

Mon, 01/10/2011 - 08:51 | Link to Comment Confused
Confused's picture

Again, I agree with your point. But the fact remains, BP doesn't have a great track record. And as someone who was in the Gulf with a transocean contractor, it can't be forgotten that they aren't exactly forthcoming with information. So for right now it doesn't seem to be a big deal. We should remain skeptical based on this info. 

Mon, 01/10/2011 - 09:07 | Link to Comment ColonelCooper
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Absolutely correct.  I do not want to appear as a shill for BP, or the industry in general on this.  But, I do work in the industry, and can't help but shake my head at how ridiculous the media has become after G.O.M.. 


Mon, 01/10/2011 - 08:45 | Link to Comment Captain Benny
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Now that PMs and oil trade together thanks to HFTs, we can all expect PMs to go up with oil this week!  Congrats to HFTs!

Mon, 01/10/2011 - 08:45 | Link to Comment Oh regional Indian
Oh regional Indian's picture

This is actually serious business. As discussed many times before on this and many other sites, $100 dollar oil will provide the gentle nudge to the global economy, especially the US economy, sending it into a tailspin.

Social fabric and it's "holding together" or ripping apart is a binary, non-reversible event. Little things like this can provide the spark.

Add the UK trucker strike, another little event/non-event, into the mix.

Not good.


Mon, 01/10/2011 - 08:58 | Link to Comment ColonelCooper
ColonelCooper's picture

ORI - I agree with your premise, but maintain that non-events of this scale would not have even been reported on had the G.O.M. not happened.  This is a routine mechanical failure, and they happen all the time, all over the country.  This story could have just as easily read, "Alaskan Pipeline on Scheduled Shutdown for Routine Maintenance." 

It is just like during G.O.M. when the press jumped all over B.P. after a containment device captured oil from a leak in a holding facility.  Key words being: containment and captured.  The system worked as designed.  NON-EVENT

I will say however, that one of two things happened.  Some oil had to have escaped on/into the ground or else the headline would have read as I wrote it above.  OR someone's ass is toast because they reported a "leak" that wasn't.

Mon, 01/10/2011 - 08:57 | Link to Comment Miss Expectations
Miss Expectations's picture

Here's the Alyeska Pipeline website:

What I think is interesting, is this:

ANCHORAGE, Alaska – Vice Admiral Thomas Barrett, USCG (Ret.) will become President of Alyeska Pipeline Service Company on January 1, 2011. The selection was announced today at a meeting of the TAPS Owners Committee.

Before joining the OFC he was Deputy Secretary of the United States Department of Transportation, serving under both President Bush and President Obama.

"I have enjoyed being part of the Office of the Federal Coordinator, advancing the gas pipeline effort in Alaska,” said Barrett. “Now I am delighted to have the opportunity to lead a company that is so critical to Alaska's future. I'm eager to meet the people of Alyeska, and work together with them to ensure the continued safe delivery of oil to the American people."

Mon, 01/10/2011 - 09:15 | Link to Comment Sands8oo
Sands8oo's picture

Last time this happend the VLCC market went fucking bonkers as BP rushed to replace its crude from the AG...


Mon, 01/10/2011 - 09:17 | Link to Comment alter ego
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Space Weather and Geomagnetically Induced Currents

Space weather generates Geomagnetically Induced Currents (GICs) that affect electrical systems on the earth's surface, including power and power transformer systems. Where the land is resistant, oil and gas pipelines form a system of long conductors that allow electrical currents to flow more easily. With the accumulative action of many magnetic disturbances pipeline corrosion is significantly accelerated. The massive oil spillage that took place in Alaska, March 2006 could have been caused by Space Weather. Click on the image of the BP oil pipeline in Alaska to obtain general information on the ground effects of space weather

Mon, 01/10/2011 - 09:22 | Link to Comment TapeReader
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The sell orders were hitting the tape in the electronic crude futures markets prior to the price drop.

This Prudhoe Bay incident is a classic example of why monitoring Order Flow is so important.

You can see a  visual representation of what the Tape and Order Flow with regards to Prudhoe news within the electronic futures markets here.

...and the real-time feed here:

Hope that you find this helpful and as interesting as I do.


Mon, 01/10/2011 - 09:43 | Link to Comment gwar5
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BP? again?

Give them a diaper

Mon, 01/10/2011 - 10:37 | Link to Comment Stuck on Zero
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If hot oil is not continuously sent through the pipeline it will freeze in the Alaska winter and the pipeline will be down until August. 

Mon, 01/10/2011 - 11:10 | Link to Comment CrashisOptimistic
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This is correct.  There is a minimum flow rate of the hot oil that keeps the pipe from freezing and cracking all along its length.  This is not something the pipeline operator will not forget and steps will be taken to keep the pipeline thawed.

This event doesn't pose a threat to the pipeline, but it is very wise for folks to be aware that the flow rate is now 600+K bpd.  It was once millions.  It is falling as Prudhoe depletes, and the endpoint is NOT zero.  The minimum non freeze flow rate is as high as 450K bpd.  We'll be there in a year or two.  

In other words, we'll fall to 450K and then zero, all at once.

Mon, 01/10/2011 - 11:44 | Link to Comment DaveyJones
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great post. thawing permafrost will also be a support problem. Interesting photos.

Mon, 01/10/2011 - 12:42 | Link to Comment DaveyJones
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this is for whoever junked. From the pipeline company itself.

Also see the link on the post below

Mon, 01/10/2011 - 12:16 | Link to Comment CrazyCooter
CrazyCooter's picture

Would be very interested in a qualified source that states this is true. Should production drop below the level you stated, they could just mix in other stuff to get the volume up to a minimum level, no?


Mon, 01/10/2011 - 12:40 | Link to Comment honestann
honestann's picture

Question:  Can't the rate fall well below 450Kbpd in the summer, when less heating is required from the oil itself?  And, if so, then can't the flow continue at a slower rate (in the summer) for additional years?

Mon, 01/10/2011 - 12:38 | Link to Comment bugs_
bugs_'s picture

Oh noez!! Some mother Caribouz will be pretty pissed off about this!  They won't be able to have their fawn next to that warm oil pipe.  You'd be pissed too!

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