Global prices of oil have had a sharp increase to what seems to be a 30-month high. This is the result of closing the North Sea Pipeline which is said to be in effect for around three weeks.
A barrel of Brent crude has climbed up to $65.47, a level not seen since June 2015, having hovered around the $62-$64 range since Opec and Russia said they would extend production curbs. Natural gas prices in the wholesale market have also risen by 5.8%.
Ineos said on Monday that its Forties pipeline system, which carries about 40% of UK oil and gas, would be closed after a crack was discovered during routine maintenance.
An Ineos director, Tom Crotty, points out that the biggest impact so far was the financial one on oil and gasfields that use the 235-mile pipeline:
“It’s very expensive for us and our shippers. That’s where the real hit is here. We are losing a lot of money on a daily basis,” he told Bloomberg TV.
He could not put a specific figure on the cost, but the fact is that the repairs were a “force majeure situation” requiring some backup and contingency plans springing into action. He said that within the next two to three days, Ineos should know if the pipeline will reopen in a fortnight or as long as three weeks.
The company only took ownership of the pipeline system on 31 October after paying £200m to BP. Crotty said it was impossible to say whether the crack had occurred while under BP’s ownership or Ineos’s, but it could have happened under either .
“This is unfortunately for us, given our very recent ownership of the line, a very significant issue to tackle right up front,” he said. “We are perfectly able to manage the situation … it’s happened on our watch.”
The nature of the crack, which has widened from 106mm to 155mm after first being discovered last week, meant that it was not possible to simply fit a sleeve over the pipeline without shutting down the system.
“The problem with this crack is it has propagated,” Crotty said, meaning it could not be guaranteed that the crack would not extend beneath the sleeve, which he likened to a bicycle tyre repair patch.
For the oil and gas producers who own the fields and use the pipeline system to get their fuel back to the mainland, there is no alternative route. However, the refineries who use the oil and gas, such as the Grangemouth refinery owned by Ineos, will be able to arrange alternative, more expensive supplies to come in by ship.