BP shuts down 100,000 barrels of Alaskan output due to leaky pipe

WASHINGTON -- BP said Tuesday it will shut down 100,000 barrels of Alaskan oil production for a "few days" after discovering a leaky pipe at a processing facility.

Analysts said the temporary loss of output at the Prudhoe Bay oil field should not have a dramatic effect on world oil markets, but with supplies already tight and crude futures trading near $66 a barrel, any snag in the industry tends to make energy traders jittery.

Light sweet crude for June delivery fell $1.36 to $64.91 a barrel in electronic trading on the New York Mercantile Exchange.

London-based BP said the leak was discovered Monday in a 12-inch pipe that collects water separated from the oil and gas it produces.

Some 400,000 barrels a day of oil are pumped at Prudhoe Bay, and BP has a 25 percent stake in the field. The company said its production loss would be 25,000 barrels per day.

"We're putting together inspection and repair plans to return the facility to normal operations," BP spokesman Neil Chapman in Houston said.

Alaron Trading Corp. analyst Phil Flynn downplayed the significance of the event for U.S. energy consumers.

"It's not that (this lost production) can't be made up elsewhere in the world," he said, "but we would like to get production here rather than elsewhere."

U.S. refiners convert more than 15 million barrels a day of crude oil into gasoline, diesel and other liquid fuels -- and about two-thirds of that oil comes from abroad. The country imports an additional 2.6 million barrels a day of refined products, according to recent Energy Department statistics.

BP's Prudhoe Bay shutdown was disclosed late Monday by Rep. Bart Stupak, D-Mich., who has been critical of the company's maintenance practices in Alaska, where two separate leaks occurred last year. BP confirmed the shutdown Tuesday morning.

Internal company documents released at a hearing chaired by Stupak last week suggested that budget cuts by BP had put pressure on managers to ignore corrosion prevention at the oil company's North Slope pipelines.

Corrosion, much of it hidden by development of high amounts of sludge, caused a leak and spill on a feeder line in March 2006, followed by another leak in August at a second line. After the second incident, the company shut down the affected lines, resulting in Prudhoe Bay production being cut in half. The company now is spending $250 million to replace 16 miles of questionable pipes.

Robert Malone, chairman of BP America Inc., BP Plc's U.S. subsidiary, acknowledged at the hearing that there were "extreme budget pressures at Prudhoe Bay" because of a sharp decline in production from the North Slope. But Malone disputed that the budget cuts were to blame for the pipeline breaks.

Shares of BP dropped 52 cents to $68.92 in morning trading.