UK pipeline outage sends oil price to more than 2-year high
LONDON - Reuters
Britain’s biggest oil pipeline from its North Sea fields is likely to be shut for a number of weeks for repairs, operator INEOS said on Dec. 12, sending international crude prices to their highest since the middle of 2015.
The closure has also disrupted gas flows through the network, which carries a third of Britain’s gas produced offshore. It has struck during a winter freeze in Britain, where snow and ice have driven up demand for heating fuel.
The pipeline, which carries about 450,000 barrels per day (bpd) of Forties crude, was shut on Dec. 11 after cracks were found. Benchmark Brent crude prices rose above $65 per barrel for the first time since mid-2015.
“We’re hearing it will be likely down for two weeks,” an industry source familiar with the operations said.
INEOS, which completed the purchase of the Forties pipeline system from oil major BP in October, said it was too soon to say how long repairs would last but said that it would be “weeks rather than days.”
A minor leak had caused a partial shutdown on Dec. 7.
The pipeline has particular significance to global markets because Forties is the largest out of the five crude oil streams that underpin the dated Brent benchmark, against which other crude prices are broadly based.
Forties is carried to Hound Point on the Scottish coast, where it is either loaded onto tankers, stored in tanks or piped to the 200,000-bpd Grangemouth refinery.
“If it’s a lengthy outage, then a recovery period for the fields will be long as well,” the trading source said.
A number of producers including BP, Shell and Chrysaor, said they had closed down oil fields in response to the outage.
According to monthly loading programs, supply of Forties is expected to reach 21 cargoes of 600,000 barrels each this month, equal to a daily supply rate of 406,000 bpd.
The closure has created havoc with loading schedules in the North Sea, with one trading source saying cargo owners had been offered options to drop cargoes from the loading program.
“At this point we would expect a large deferral list for the Forties loading program to spill over into January,” analysts from JBC Energy said in a note.