BP to decide by Friday if western Prudhoe Bay field can operate

BP to decide by Friday if western Prudhoe Bay field can operate

New York (Platts)--9Aug2006

BP expects to decide by Friday if it can continue to operate the 200,000
b/d western operating area's production at the 400,000 b/d Prudhoe Bay field,
BP America President Bob Malone told analysts in a conference call late
Tuesday.

"Right now, we will be making a decision with the federal and state
governments by Friday as to whether we need to continue taking down that line
[in the western area] for safety purposes, or whether we can maintain
production," he said, according to a transcript on BP's web site.

He said BP is currently "putting in place all the plans to bring down the
west side of the field this weekend."

BP announced last Sunday it was shutting the 400,000 b/d Prudhoe Bay
field after finding severe pipeline corrosion. The eastern portion of Prudhoe
is considered more problematic, since that is where the most recent line
failure occurred.

It will take four to five weeks to pig the 34-inch line there, according
to Steve Marshall, president of BP Alaska. "The eastern side of the field is
driven by a different set of issues," said Marshall. "Given that the flow
station 2 line is the one that failed, I would say our primary focus there is
to understand the extent to which a similar corrosion mechanism may or may not
exist further downstream." BP plans to replace pipelines in the Prudhoe field.
While "much of the steel has been ordered," delivery of some of the pipelines
will not be until December, said Marshall.

BP has ordered 21,000 feet (4 miles) of pipe from Nippon Steel scheduled
for delivery in Alaska by December and is working "to expedite that," he said.
The company also has an order with US Steel for 30,000 feet of 24-inch pipe
for October delivery.

"An additional 52,000 feet, or 10 miles, of 18-inch line, and probably
around 30,000 feet of 24-inch line, will be needed for the full replacement,"
said Marshall. "That is being accelerated, but we do not have delivery dates
on that material." The price of pipeline replacement, which was not disclosed,
should be covered by the extra $1 billion BP has said it will spend on US
refining operations, said Fergus MacLeod, head of BP's investor relations. "I
can tell you that the budget for this is included in the guidance that was
given 25 July, and there is nothing of sufficient materiality in the new
information that we have that would cause us to change that," he said.

He said insurance will not cover any of the costs: "The group's policy on
insurance is to self-insure, and therefore it is not my belief that there is
any insurance coverage for an instance of this nature."

-- Beth Evans, beth_evans@platts.com

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