December 13, 2017 / 9:57 AM / in 10 months

Ineos declares force majeure on North Sea oil after Forties shutdown

LONDON (Reuters) - North Sea operator Ineos has declared force majeure on all shipments of crude oil, natural gas and condensates through its Forties pipeline system that has shut off vital energy supplies to Britain, according to a source familiar with the matter on Wednesday.

FILE PHOTO - A logo is pictured in the headquarters of INEOS chemicals company in Rolle, Switzerland, November 13, 2017. REUTERS/Denis Balibouse

The company closed the system, which carries the equivalent of a quarter of the North Sea’s 2 million barrels in daily oil production and a third of the UK’s offshore gas output, on Dec. 11 after it discovered a hairline fracture in an onshore section of the pipeline.

It has since said it would be closed for at least two weeks.

On Wednesday, the company told customers that force majeure was effective on all liquid fuel transported via the pipeline, including Forties crude oil, liquid petroleum gas, condensate and gas as of Dec. 11.

Force majeure, which suspends a company’s contractual obligations in the wake of situations that lie beyond its control, is extremely rare in the North Sea.

A number of North Sea oil and gas producers, such as France’s Total earlier in the day told customers exports of gas would be halted from some fields for at least three weeks until early January because of the Forties pipeline shutdown.

Swiss-based chemicals company Ineos, which bought the Forties Pipeline System for $250 million from BP in late October, said on Wednesday it has not yet taken a decision on repairing the pipeline crack that materialized during a routine inspection of onshore infrastructure last week.

“A number of repair options are being considered and progressed,” Ineos said earlier on Wednesday in a statement. “At this stage, it is still too early to say how quickly the repair will take, but it is expected to be a matter of weeks rather than days.”

“Assuming the downtime is limited to 15 days, this would deprive the North Sea market of around 7 million barrels of Forties,” energy consultant JBC Energy said in a note.

Last week, Ineos advised some local residents to seek temporary accommodation while the shutdown remained in force.

The Health and Safety Executive, an arm of the UK government that deals with enforcing health and safety legislation, said it was monitoring the situation.

“HSE is aware of the shut-down of the Ineos Forties Pipeline and a specialist pipeline inspector is visiting the site as we begin investigating the circumstances,” an HSE spokeswoman said in an emailed statement.

UK natural gas prices have surged to their highest since 2013 after the closure of the pipeline that carries roughly a third of the country’s offshore gas output.

Oil prices briefly touched their highest since mid-2015 at about $65 a barrel after the shutdown, which has cut off supply of the largest North Sea crude stream.

Forties crude is sent through the pipeline to the Scottish coast and is loaded directly onto oil tankers at Hound Point to be sent to storage tanks in Dalmeny or piped to Ineos’s 200,000 bpd Grangemouth refinery.

One trading source said late on Tuesday that a tanker at Hound Point had not been able to take on all of its scheduled load of crude oil because the system was “running dry”.

Reporting by Susanna Twidale and Amanda Cooper; Editing by David Goodman and David Evans

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