January 13, 2011 / 9:15 PM / in 7 years

UPDATE 2-Alaska to shut oil pipe this weekend for bypass

* Bypass to restore full volumes this weekend

* Pipeline flows at 320,000 bpd

* Alaskan crude inventories rose 13 pct Wednesday

(Updates with pipeline throughput of 320,000 bpd)

By Joshua Schneyer

NEW YORK, Jan 13 (Reuters) - Alaska’s main oil pipeline will shut for 36 hours over the weekend to install a bypass aimed at restoring oil shipments to full volumes after the line was shut following a leak last week, its operator said on Thursday.

Crude flow was 320,000 barrels per day on Thursday, about half of normal levels, after operator Alyeska partially resumed shipments earlier this week. The rate fell from a previous 400,000 bpd on Wednesday, as the pipeline drew less oil from storage tanks along its trajectory, said spokeswoman Stefani Bell.

Alyeska plans to install a bypass line that will allow shipments to return to normal rates of 630,000 to 650,000 bpd, or about 12 percent of U.S. oil output. The line will remain near its current, reduced rates until it is shut down for the bypass, the operator said late Wednesday.

The state typically produces more than 600,000 bpd of crude oil, but the idling of the Trans Alaska Pipeline System (TAPS) cut production to as low as 35,000 bpd earlier this week.

As of Wednesday, BP Plc (BP.L) had restored most oil production in Prudhoe Bay, the largest U.S. oil field, government data shows.

Alaskan oil production rose to 358,424 barrels on Wednesday, up from 49,717 barrels on Tuesday, according to Alaska’s Department of Revenue.

Alaskan crude stockpiles also rebounded on Wednesday, gaining 13 percent to 2.45 million barrels, from 2.16 million on Tuesday.

    Since TAPS closed after the small leak on Jan. 8, around 2.35 million barrels of Alaskan crude production was shut in through Wednesday, according to a Reuters calculation.

    (Factbox: [ID:nN1376382] )

    The shutdown helped propel gains in crude prices CLc1 to 27-month highs on Wednesday. On Thursday, U.S. oil futures fell, settling down 46 cents at $91.40 a barrel.

    Alaskan crude was shipped this week from storage facilities at the Valdez port terminal to keep refiners supplied while the pipeline was shut.

    The small pipeline leak was discovered at a pumping station along the 800-mile (1,280-km) line, forcing its shutdown.

    Alyeska received permission from regulators to restart the line temporarily on Tuesday, to prevent it from freezing.

    An administrative order from the Environmental Protection Agency requires Alyeska to take several safety steps to prevent any spilling of oil onto the gravel or tundra. It also requires Alyeska to submit a final report on the incident, including details of all response actions, by May 31. (Editing by Marguerita Choy and Lisa Shumaker)

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