US reserves may be used as BP shuts down largest US oilfield

Aug 7, 2006, 18:09 GMT

New York - The US Energy Department Monday said it was prepared to release some of its strategic oil reserves after Britain's BP Plc said it would shut down Alaska's Prudhoe Bay oilfield, the largest in the US, for an indefinite period.

Crude oil prices rose above 76 dollars per barrel in New York trading Monday morning, a more than two per cent increase. BP said it discovered corrosion in a pipeline and would likely have to replace a five-kilometre stretch.

The phased shutdown at the Prudhoe Bay oilfield in northern Alaska was expected to take days and would shut the tap on 400,000 barrels per day in production - about 8 per cent of US daily output - the world's second-largest publicly traded oil company announced Sunday night in Anchorage.

The oilfield is part-owned by BP, Exxon Mobil Corp, Conoco Phillips and Chevron Corp. Other fields in the remote Alaskan region were not affected.

An Energy Department spokesperson said that requests to release oil from the US Strategic Petroleum Reserve would be considered. The shut down comes at the peak of the US travel season and will further impact already surging petrol prices.

The shutdown announcement is the latest in a string of safety concerns affecting BP, after 6,400 barrels of crude oil leaked in March from a BP-operated pipeline in the same area of Prudhoe Bay, an incident that is now under investigation by a grand jury.

Last year, an explosion at a Texas refinery killed 15 employees, leading the company to receive the largest fine ever handed out by US refinery authorities. US regulators have also accused three BP traders of trying to corner the US propane market.

The corrosion had caused a small leak of four to five barrels of oil on the eastern side of the Prudhoe Bay oilfield, the company said.