BP May Increase Oil Flow in Alaska

BP is aiming to restart oil production in the eastern half of Alaska’s Prudhoe Bay oil field by the end of September, sources familiar with the company’s plans said Thursday.

Plans call for a partial restart of a pipeline that connects with the Trans-Alaska Pipeline’s Flow Station 1, allowing up to half of the 200,000 barrels a day of lost production to begin flowing again.

Prudhoe Bay normally supplies about 400,000 barrels daily, or 8% of U.S. domestic supply, but BP shut down half of the field in early August after government-ordered pipeline inspections turned up severe corrosion inside a segment of a line on the bay’s eastern side.

News of the unexpected shutdown sent oil prices soaring in August amid fears that West Coast refineries, which depend heavily on oil supplies from Alaska, could run short of crude.

A BP spokesman would neither confirm nor deny the end-of-September target date.

“We are still working to complete our plans, but ultimately we need the approval of the [U.S.] Department of Transportation before we can restart,” BP spokesman Daren Beaudo said.

Thomas Barrett, the top U.S. pipeline regulator, is due to tour the Prudhoe Bay facilities today and receive a briefing from BP personnel on the progress of the inspections, a Transportation Department spokesman said.

The onset of the Alaskan winter is one of the factors driving the restart decision, a source at a regulatory agency that oversees pipelines said.

“Things change from day to day, but the picture is getting clearer. The line will either have to be restarted or emptied sooner than later due to the onset of winter. It cannot stay the way it is into the winter,” the official said.

BP is required to submit its plans for the pipelines by Sept. 9 under a corrective action order issued by the Transportation Department.

The company also is required to submit plans to remove the oil from any pipeline it decides not to return to service on that date to ensure that the oil does not congeal inside the pipeline, which would increase the risk of environmental damage if the pipelines developed leaks over the winter.

BP is performing corrosion-detection tests on the eastern transit line that may be restarted. The findings so far are encouraging, and no signs of serious corrosion have been found, Beaudo said.

BP’s image in the U.S. has been tarnished by a string of accidents, environmental incidents and accusations of market manipulation since a deadly refinery blast in March 2005.