Federal pipeline regulators gave British energy giant BP permission Friday to restart production from a large section of Prudhoe Bay, a step that could bring the hobbled oil field back to near full output within a week.
It's a softer landing for Prudhoe than BP executives and state officials initially feared in early August, when a pipeline corrosion crisis forced the company to begin an unprecedented shutdown. The worry then was that the nation's largest oil field might be wholly or partially offline for many months pending pipeline repairs.
Now it appears likely the field will be back to its usual production of more than 400,000 barrels of oil per day by the end of September, less than two months after a leak from a major pipeline forced BP to begin its jarring shutdown on Aug. 6.
David Peattie, a London-based BP executive who spent time in Prudhoe helping direct the comeback, said the federal OK to restart the idle eastern half of the field, where the pipe leaked, is "an important milestone" in restoring production ahead of schedule.
Restoring production is a big financial boost not only for BP and the other oil companies that own shares of Prudhoe, but also for the state, which relies heavily on tax and royalty revenue the field generates.
By reactivating wells, processing plants and pipelines in eastern Prudhoe, overall field production will go up by about 150,000 barrels per day from its current level, BP said.
That's about $9 million worth of oil a day at today's price. For the state treasury, it's an extra $1.6 million per day in cash flow, said Robynn Wilson, state tax director.
Unfortunately for the state, however, the Prudhoe outage meant lost money because the price of oil has dropped considerably since early August.
North Slope crude oil for delivery to West Coast refineries sold Friday for $58.80 per barrel, down nearly $15 from the last trading day prior to BP's Prudhoe shutdown announcement.
On Friday, the U.S. Pipeline and Hazardous Materials Safety Administration gave BP permission to restart most of the eastern side of Prudhoe.
Agency officials said they were allowing the restart based on extensive corrosion inspections along a key pipe, known as an oil transit line, plus reassuring reports from two independent technical experts. The transit line, which consists of two segments, is the main trunk that feeds oil from the eastern half of the field into the trans-Alaska pipeline, which runs 800 miles south to the Valdez tanker terminal.
Only the lower segment of the transit line, 34 inches in diameter, will be restarted. The upper segment was the pipe that leaked, and BP does not plan to restart that part of the line. Rather, it plans to reroute oil into a bypass pipeline.
Federal pipeline administrators said restarting eastern Prudhoe will allow BP to run devices known as pigs through the transit pipeline to clean it out and better inspect it for corrosion.
Critics, including federal regulators and members of Congress, have flayed BP for failing to run such pigs through the pipes for many years, allowing sludge to build up inside them and corrosion to eat holes into their steel walls. A leak from a transit line on the western side of Prudhoe, which caused an estimated 201,000-gallon spill last winter, is now the subject of a federal criminal investigation. It was the Slope's largest oil spill ever.
Thomas Barrett, head of the pipeline safety administration, said BP must have people and equipment staged and ready to contain and clean up any spills once the restart begins.
And if any trouble develops, the agency will order the immediate shutdown of the line, Barrett said.
BP spokesman Daren Beaudo said the company is confident the pipe is safe, and that Prudhoe will ramp up to full production and stay there.
"We have a high degree of confidence in the integrity of the line because we've inspected thousands of feet of pipe," he said.
Those inspections, which involved the use of sound waves and other technology to look for thin spots in the walls of the above-ground pipeline, showed no significant corrosion, he said.
Ultimately, BP plans to replace all 16 miles of transit pipelines implicated in the corrosion scandal. But replacing pipe shouldn't interrupt oil flow, Beaudo said.
As many as 300 extra workers were deployed to the Slope to help clean up the August spill, to test pipelines for corrosion, and to engineer and weld bypasses. BP also had to seek permission from a raft of state agencies, including the Regulatory Commission of Alaska and the Alaska Oil and Gas Conservation Commission, to rejigger pipelines and change oil flow patterns.
BP runs Prudhoe on behalf of itself and the other owner companies: Exxon Mobil, Conoco Phillips, Chevron and Forest Oil.
Daily News reporter Wesley Loy can be reached at wloy@adn.com or 257-4590.
