UPDATE 2 — Oil and gas prices soared after Ineos said on Monday it will shut down its Forties Pipeline System, which delivers almost 40% of the UK’s North Sea oil and gas output, to repair a crack in the pipe just south of Aberdeen.
Grangemouth refinery operator Ineos completed the acquisition of the North Sea Forties Pipeline System (FPS) and Kinneil Terminal from BP in October for $250 million.
As a prolonged cold snap sweeps across the UK, the international crude oil benchmark, North Sea Brent, rose to a two-year high of $64.93 a barrel and wholesale natural gas prices for same-day delivery in the UK soared almost 30%.
An Ineos spokesman said: “It’s early days and it is premature to give a time frame for the repair work.
“We can’t give a precise estimate other than to say it is a matter of weeks, rather than days.”
The Forties Pipeline System carries around 450,000 barrels per day of Forties crude from the North Sea to the Kinneil processing terminal.
The pipeline handles nearly a quarter of the North Sea’s crude output and is also a major route for bringing natural gas to the UK that has been produced offshore.
Fiona Legate, Wood Mackenzie senior analyst for the North Sea oil industry, said even a temporary shutdown of the pipeline would have wide-reaching implications for the UK oil and gas industry.
“FPS transports liquids from over 80 fields, including the two largest producers in the UK — Buzzard and Forties,” said Legate.
Reuters reported that Ineos said the Grangemouth refinery would have to seek “alternative supplies of crude” but that there was enough oil currently in storage at Grangemouth for the company to “manage the situation.”
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, just south of Aberdeen.
“A repair and oil spill response team was mobilised on Wednesday, December 6, 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.
“A 300 metre 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.
“Despite reducing the pressure the crack has extended, and as a consequence the Incident Management Team has now decided that a controlled shutdown of the pipeline is the safest way to proceed.
“This will allow for a suitable repair method to be worked up based on the latest inspection data, while reducing the risk of injury to staff and the environment.
“As always, safety remains our top priority and local residents, FPS users and other stakeholders are all being kept fully informed of the situation as it develops.”