November 24, 2010 / 9:00 PM / 7 years ago

Feds limit Houma-to-Houston oil pipeline pressure

HOUSTON, Nov 24 (Reuters) - Shell Pipeline Co (RDSa.L) will operate its Houma-to-Houston crude oil pipeline at reduced pressure pending inspection and maintenance after a leak last week, an order from federal regulators said Wednesday.

The U.S. Pipeline and Hazardous Materials Safety Administration issued a corrective action order on Tuesday to run the 22-inch-diameter, 360,000 barrel-per-day pipeline at 80 percent of normal pressure after a leak shut it down Nov. 16.

Shell removed and replaced the failed section of pipe and initiated restart of the pipeline Monday, but PHMSA limited operating pressure pending inspection of the 300-mile line and, if needed, repair of any flaws found, the order said.

Shell has not responded to requests for comment about the leak, estimated at 1,000 barrels, in a rural area near Vinton, Louisiana, west of Lake Charles.

A possible cause of the leak is external corrosion, but a final determination of the cause awaits further investigation, PHMSA said. The agency ordered a detailed laboratory inspection of the failed section.

The line is a key carrier of crude oil to refineries in Louisiana and Texas. The break west of Lake Charles affected supplies to plants in the Beaumont-Port Arthur and Houston areas.

Market reaction to the shutdown was subdued because crude oil inventories are ample, but traders said the price of Poseidon sour PSD-, a Gulf of Mexico grade dependent on the line to reach customers, dropped.

Cash crude market trade was limited Wednesday because most traders are finished for December and the Thanksgiving holiday is Thursday, but Poseidon remained at about a $1 discount to Mars sour MRS-. Mars and Poseidon normally sell about even. (Reporting by Bruce Nichols; editing by Jim Marshall)

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