BP to keep half of Prudhoe Bay oil field in operation

BP, the UK oil giant, said at the weekend it would keep open half of Prudhoe Bay, North America's largest oil field, after agreeing with regulators to launch round- the-clock visual and infra-red surveillance of its key oil transit line.

The decision comes after US congressmen questioned whether the UK oil giant's decision a week ago to shut down production in the 400,000 barrel- per-day field was an attempt to manipulate the oil market.

Prices had immediately spiked on the closure as fears grew that the already tight oil market would lose 8 per cent of US production for weeks, if not months.

On Friday, in a strongly worded letter to BP chief executive, Lord Browne, Joe Barton, the powerful chairman of the House energy committee, suggested that the Alaska shutdown could be part of a wider strategy by BP to influence the market, particularly in light of recent allegations by US regulators that the company engaged in illegal trading in the propane gas market. The company has denied those allegations.

Mr Barton, a Republican from Texas, attacked BP's "chronic neglect" of the pipeline. He plans a hearing on BP's corrosion management next month.

BP had said it would shut the entire field after corrosion data and a leak indicated its pipelines were far more corroded than it had expected.

That information followed the biggest-ever leak at Prudhoe Bay in March, which brought heightened regulatory scrutiny over the field and prompted a grand jury to begin probing BP for possible criminal charges.

However, Kemp Copeland, Prudhoe Bay field manager, said that ultrasonic testing on about 700 spots along the crucial five miles of pipeline in the past week, coupled with about 800 since the March spill, had indicated that the western half of the field could continue to operate safely.

"The results have been encouraging," said Bob Malone, the new BP America president.

BP is now producing about 150,000 barrels per day and will bring that up to 200,000 after completing maintenance planned before the recent leak.

Regulators, who have grown increasingly impatient with BP since it failed to meet key deadlines from the March spill to use high-tech equipment to clean and perform corrosion tests on lines, have ordered the company to take additional precautions to continue operating half the field.

Oil prices hit a new record of $78.65 early last week after the problems at Prudhoe emerged.

Prices later eased in response to news that Britain was claiming to have thwarted a plot to blow up aircraft in trans-Atlantic flight and investors recalled the slump in fuel demand that followed 9/11.