Energy Prospectus

BBC: Major Forties oil pipeline to be closed for repairs
By Kevin Keane at around 4ET on December 11, 2017

One of the UK's most important oil pipelines is being closed after a crack was discovered in Aberdeenshire.

The Forties pipeline carries North Sea crude oil across land for processing at Grangemouth.

The crack was discovered last week at Red Moss near Netherley.

The pipeline's owner Ineos said on Monday that, despite pressure being reduced, the crack had extended. The Forties pipeline carries about 40% of North Sea crude oil.

More than 80 platforms will have to suspend production. The price of Brent crude rose about 2% to $64.69 a barrel amid surprise that the pipeline could be shut for about three weeks - far longer than expected.

Ineos said there would be a big impact on the industry but not on consumers.

'Suitable repair method'

Ineos said in a statement: "Last week during a routine inspection Ineos contractors discovered a small hairline crack in the pipe at Red Moss near Netherley.

"A repair and oil spill response team was mobilised on Wednesday, after a very small amount of oil seepage was reported.

"Measures to contain the seepage were put in place, no oil has been detected entering the environment and the pipe has been continuously monitored."

The company added: "A 300m cordon was set-up and a small number of local residents were placed in temporary accommodation as precautionary measure. The pipeline pressure was reduced while a full assessment of the situation was made.

"The incident management team has now decided that a controlled shutdown of the pipeline is the safest way to proceed."
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Comments from one of the very sharp EPG members:
"This appears to be really material. The 36" pipeline carries about 900K bpd of oil, to the 1100K bpd max. 3 weeks disruption will drain at least 19 million barrels European storage. After 2017 drain this will be really material to bring storage to normal in a short 3 weeks. US exports to Europe should rise, but due to several weeks lead time we will likely notice it in January-February, exactly when we need it more during low demand season. OPEC freeze has approached a point when any disruption now starts to matter unlike 2016-2017 when Iran ramped up, then Nigeria/Libya ramped up. Keystone shut results in Cushing drain, now Forties, this should have bigger impact."

NOTE: I posted earlier that Nigerian Oil Workers Union may go on strike this week.

Reuters now jumping on this
By Jessica Resnick-Ault

NEW YORK (Reuters) - Oil prices rose on Monday, overcoming declines early in the session, after a North Sea pipeline shut for repairs and investors focused on commodities following an explosion in New York.

Brent crude futures (LCOc1) settled up $1.29, or about 2 percent, at $64.69 a barrel.

U.S. West Texas Intermediate (WTI) crude futures (CLc1) settled at $57.99 a barrel, 63 cents or 1 percent above their last settlement.

The difference between the two benchmarks was the greatest since late October, as Brent rallied after the shutdown of the pipeline that carries the biggest of the five North Sea crude oil streams that underpin the benchmark.

The pipeline, which can carry 450,000 barrels per day of Forties crude from the North Sea to the Kinneil processing terminal in Scotland, has been operating at reduced capacity for about four days before the shutdown.

"It is a supply concern not only because the pipeline transports a significant portion of North Sea crude oil output, but also because it may take weeks before the issue is resolved," said Abhishek Kumar, Senior Energy Analyst at Interfax Energy's Global Gas Analytics in London.

The market had expected the pipeline to return to service quickly and was surprised by the extended shutdown, said John Kilduff, partner at Again Capital LLC in New York.

"It's a significant amount of crude oil in a market that has been the tightest for crude oil," Kilduff said.

Earlier in the session, both benchmarks popped higher after an explosion rocked New York's Port Authority Bus Terminal, one of the city's busiest commuter hubs.

Investors tend to head for hard-asset commodity markets like gold and silver during high-risk events, and oil can also attract investment, Kilduff said.

Brent and WTI have gained well over a third from 2017 lows, drawing support from a cut in production by the Organization of the Petroleum Exporting Countries and a group of non-OPEC producers, including Russia, which has been in place since the start of the year.

During the weekend, Kuwait's oil minister suggested that an exit from the supply-cut agreement would be studied before June.

The United Arab Emirates energy minister said on Monday that OPEC plans to announce in June an exit strategy from the cuts, though he added it did not mean the pact would end by then.

Gains from the cuts could also be undermined by rising output from the United States, which is not participating in the deal to withhold production.

The number of rigs drilling for new oil in the United States last week rose by two to 751, the highest since September, energy services company Baker Hughes said on Friday.

"The largest concern for investors currently remains the rise in the U.S. rig count," said Shane Chanel, equities and derivatives adviser at ASR Wealth Advisers.

A higher rig count points to a further rise in U.S. crude production , which is already up more than 15 percent since mid-2016 at 9.71 million barrels per day. That is the highest since the early 1970s, and close to the output levels of top producers Russia and Saudi Arabia. < If I have said it once, I have said it a thousand time - "The United States tight oil plays CANNOT MEET RISING GLOBAL OIL DEMAND ON THEIR OWN. - Dan