LONDON (Reuters) - Britain’s biggest pipeline from its North Sea oil and gas fields is likely to be shut for several weeks for repairs, its operator said on Tuesday, disrupting gas flows and sending international crude prices to their highest since mid-2015.
The closure has struck during a winter freeze in Britain, where snow and ice have driven up demand for heating fuel just as gas flows through the network, which carries a third of Britain’s gas produced offshore, were disrupted.
“We are working to get the pipeline restored to full operation as quickly as we can safely do so... We have previously indicated a time frame of three to four weeks and we believe it is no less than two,” operator INEOS said in a email to customers seen by Reuters.
The pipeline, which carries about 450,000 barrels per day (bpd) of Forties crude, was shut after cracks were found.
It 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. Benchmark Brent crude prices rose above $65 per barrel for the first time since the middle of 2015 following the closure on Monday. [O/R]
INEOS only completed the purchase of the Forties pipeline system from oil major BP in October. A minor leak had caused a partial shutdown on Dec. 7 and a full shutdown on Monday. INEOS said the small crack has not increased over the past 24 hours.
Paul Wheelhouse, the Scottish energy minister, said there were no plans to shut the 200,000 bpd Grangemouth refinery, which uses Forties crude.
“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.
The largest contributor to the Forties stream, the 180,000-bpd Buzzard oil field run by Nexen Petroleum UK Ltd, a subsidiary of China’s CNOOC, had also closed, two trading sources said. [CRU/OUT]
Monthly loading program show the 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.
“The timing of the outage could not be much worse as winter weather is just materializing,” Jefferies bank analysts wrote.
Jefferies estimated the closure resulted in production loss for BP of 105,000 bpd, for Total of 55,000 bpd, for Chevron of 45,000 bpd, for Exxon Mobil of 40,000, for Eni of 25,000 bpd, for Shell of 25,000 bpd, for ConocoPhillips of 15,000 bpd.
The Paris-based International Energy Agency, which advises Western governments and coordinates the release of oil from strategic stocks in the case of supply disruptions, said it stood ready to take action but it did not believe this was necessary for the time being.
“The market is amply supplied from other sources and stocks are well above the five-year average,” the IEA said.
Writing by Dmitry Zhdannikov; Additional reporting by Oleg Vukmanovic; Editing by Alexander Smith and Adrian Croft