Shell works to fix Gulf of Mexico pipeline leak

Bruce Nichols and Joshua Schneyer, Reuters 28 Jul 09;

HOUSTON/NEW YORK (Reuters) - Shell and the U.S. Coast Guard rushed Tuesday to contain 1,400 barrels of crude oil spilled into the Gulf of Mexico from a leaking Shell-operated pipeline, fighting back an oil slick with skimmer ships and airplanes.

Shell discovered the leak Saturday on its 173,000-barrel-per-day (bpd) capacity Eugene Island oil pipeline, 30 miles from Louisiana's coastline and 60 miles southwest of Houma, Louisiana.

The pipeline has been shut down, halting daily supplies of 100,000 barrels a day of Eugene Island oil. The Eugene Island line also was carrying new oil from Chevron's Tahiti platform which began flowing in May.

The pipeline is still leaking a "small amount" as it drains, a Shell spokesman said.

Shell had no estimate on repairs or a target date for restart of the 20-inch diameter pipeline, but people knowledgeable about operations said fixing it in 60-foot-deep water could take a day if the problem is small to weeks if it is big. Restart requires government approval.

"At this time, we cannot forecast when restart will occur. Our top priorities during the response and restart phases are safety and the environment," a company spokesman said.

The oil spill was among the largest in recent years in U.S. waters, officials said. Helicopters and airplanes that flew over the spill viewed a 16-by-3-mile "rainbow-like" oil sheen, Coast Guard Petty Officer Tom Atkeson said.

The slick is unlikely to reach land because the oil will evaporate and decompose if it is not picked up before reaching shore, Atkeson added.

Two skimming vessels by Tuesday had cleaned up 1,500 gallons of oil and water mixture of the 58,000 gallons believed to have spilled, Atkeson said. Some of the oil also has been dispersed by chemicals dropped from airplanes.

The cause of the leak awaited investigation. Shell said divers would inspect the source of the leak when they arrived on the scene late Tuesday, and planning of repairs could begin as soon as Wednesday.

As pipeline operator, Shell owns a 23 percent stake in the line. Other stakeholders include ExxonMobil, Marathon, Chevron and ConocoPhillips.

Saturday's oil spill was equivalent in volume to a November 2007 bunker fuel spill into the San Francisco Bay that drew ire from environmental groups. That spill reached local beaches.

Officials at the U.S. Department of Transportation, which regulates the pipeline, the Coast Guard and the Minerals Management Service, all said they would investigate and help determine when the pipeline may restart.

In addition to repairs, Shell may consider rerouting some of the Eugene Island offshore crude through other offshore pipelines, a spokesman said. Rerouting helped keep flows steady to refineries following Hurricane Katrina in 2005.

The futures market shrugged off the news, with U.S. light sweet crude for September delivery falling $1.08 to $67.28 a barrel on Tuesday. In the cash crude market, traders saw no deals for Eugene Island, but a similar grade, Bonito, was offered at up to $2.40 a barrel above West Texas Intermediate, a rare premium, traders said.

Bonito last dealt publicly for 35 cents above WTI, on July 22.

(Editing by Christian Wiessner)

U.S. Gulf oil spill nearly cleaned up, pipe waits fix
By Bruce Nichols and Joshua Schneyer, Reuters 31 Jul 09;

HOUSTON/NEW YORK (Reuters) - The mess caused by the Eugene Island pipeline leak last weekend - in the Gulf of Mexico and the U.S. cash crude market - appeared nearly cleaned up Friday.

It was unclear how long it would take to fix the line, in which divers found a crack 33 miles offshore after it was shut down last Saturday. The damage has not been described in detail, and no repair plan had been announced as of Friday.

But Shell Pipeline Co and the Coast Guard issued a joint news release declaring impending victory over the 1,500 barrels of oil spilled. A spokesman predicted they would pick up the last remnants this weekend before it reaches shore.

Traders and brokers in the U.S. cash crude market, who had bid prices up sharply after the leak was disclosed late Monday, sent them back down in thin trading Friday after Shell said it had restored most of the affected oil flow.

"Overflights this morning revealed that skimming had reduced the remaining oil to several six-foot-(1.8-meter)-wide streamers approximately a quarter-mile long," a news release said. "Skimming will continue until the streams are collected ... and should conclude this weekend."

In the crude market, Heavy Louisiana Sweet fell $1.15 a barrel to $2.50 a barrel over West Texas Intermediate. Light Louisiana Sweet slid 60 cents to a $4.30-premium. Traders still assessed Eugene Island crude bids at WTI plus $2.00 against plus $2.50 offered, rare strength, but no sales were reported.

At its peak, the spill was described by officials on scene as "a nine-mile sheen with several streamers of darker oil," and had it moved to within 12 miles of the coast Thursday. On Friday, what was left was 15 miles from shore.

Shell said Friday the pipeline was still shut down but that it had managed to reroute 80,000 barrels per day (bpd) of the 100,000 bpd that was flowing through the pipeline when the leak was discovered.

It remained unclear exactly how much delivery of oil was impeded after Shell said the line was shutdown to control the leak. Chevron Corp said its Tahiti platform, which sends oil through the line, never stopped flowing.

Shell did not elaborate. All a Chevron spokeswoman would say is there are alternative pipeline routes that can be used.

(Editing by Marguerita Choy)