More BPT Trouble?
As I mentioned a few weeks ago during my assessment of the BP Prudhoe Bay pipeline corrosion issue, it seems that the skeletons are starting to come out of the BPT closet. This site does a good job of aggregating recent articles and press releases.
To summarize, BP is replacing the corroded pipeline segments with pipe that is half the diameter of the old pipe. A quick review of high school math means that this reduces the volume of oil that the pipe can carry by 75%! Why would anyone want to do that unless the Prudhoe Bay field is not producing as much oil as it once did?
In fact, that exact reason was alluded to by a BP representative when the corrosion story first broke. It was stated that slow moving oil causes sediments and sludge to settle out of the oil slurry. This sediment provides a feast for bacteria that in turn generate chemicals which degrade the pipe.
Makes sense. If the field is running dry, then the oil that is being extracted would not be moving as fast. Therefore, if you do have to spend to replace/repair the pipeline, there is no reason to spend more cash on pipe than what is needed.
Seems recent events continue to plague the Prudhoe Bay field.
I expect BPT to decline at least 25-35% as these scenarios continue to unfold. The class action / investor fraud lawsuits cannot be far behind. BPT moves from my probation list to my watch list. I no longer intend to establish a position.
Disclosure: I do not own shares of BPT.
To summarize, BP is replacing the corroded pipeline segments with pipe that is half the diameter of the old pipe. A quick review of high school math means that this reduces the volume of oil that the pipe can carry by 75%! Why would anyone want to do that unless the Prudhoe Bay field is not producing as much oil as it once did?
In fact, that exact reason was alluded to by a BP representative when the corrosion story first broke. It was stated that slow moving oil causes sediments and sludge to settle out of the oil slurry. This sediment provides a feast for bacteria that in turn generate chemicals which degrade the pipe.
Makes sense. If the field is running dry, then the oil that is being extracted would not be moving as fast. Therefore, if you do have to spend to replace/repair the pipeline, there is no reason to spend more cash on pipe than what is needed.
Seems recent events continue to plague the Prudhoe Bay field.
I expect BPT to decline at least 25-35% as these scenarios continue to unfold. The class action / investor fraud lawsuits cannot be far behind. BPT moves from my probation list to my watch list. I no longer intend to establish a position.
Disclosure: I do not own shares of BPT.
posted by Nate at 1:34 AM
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