If Grangemouth Strike Hits, Expect Shut-In Of 25% Of UK Gas Supply, Poss. Closure Of 40s Pipeline

[hatrack]

The BBC report Wednesday evening that talks have broken down between Ineos, the operators of the Grangemouth oil refinery in Scotland and Unite, the trade union representing workers at the refinery who are threatening to strike Sunday and Monday over a dispute about adjustments to their pension scheme.

Grangemouth lies at the end of the Forties oil pipeline system that gathers oil (and liquids) from oil and gas fields throughout a large area of the Central North Sea. Whilst Grangemouth processes around 200,000 bpd the pipeline system handles around 700,000 bpd and according to this CNN report, a BP spokesman has said they may have to shut down the whole pipeline system. With the global oil market and European gas market already stretched, the impact of this dispute may reverberate around the world.

The original TOD thread is here, and thanks to all posters for their contributions and links. Under the fold is a bunch of background and informational materials--including why Grangemouth is important, etc.

Forties pipeline to close? Unofficial reports say it is likely that the whole Forties pipeline system may close citing shared power supply with Grangemouth as the reason. This would shut down around 700,000 bpd oil production and some 70 million cubic meters per day associated gas production affecting over 60 offshore facilities. That is about 25% of UK daily gas consumption. It seems likely that the UK can meet this gas shortfall for a few days from gas storage....


EDIT

http://europe.theoildrum.com/node/3893#more

Ed. - hyperlinks to articles mentioned in this snipped at original site.

[Dead_Parrot]

1. That's one way to make it last a little longer

(Sorry, still got the optimism thing in my head.)

[muriel_volestrangler]

2. BP's Forties Oil Pipeline to Shut on Refinery Closure

BP Plc said it will start shutting down the Forties Pipeline System, which carries about 40 percent of the U.K.'s oil production, tomorrow because of the closure of Ineos Group Holdings Plc's Grangemouth refinery in Scotland.

``Preparations have begun for the shutdown of the Forties Pipeline System this weekend,'' BP spokeswoman Joanne McDonald said in a telephone interview today. ``There won't be any throughput through Forties from Saturday night.''
...
The price of Forties crude rose to the highest in more than a week relative to the Dated Brent benchmark yesterday on concern the strike would cut production.

Forties cost 70 cents a barrel less than Dated Brent, compared with a discount of $1.25 a barrel April 23, according to data compiled by Bloomberg. That's the smallest discount since April 16.

http://www.bloomberg.com/apps/news?pid=20601102&sid=aXx.1yE4vcDQ&refer=uk

But the latest report says the international prices of oil are dropping:

At 10:03 a.m., U.S. crude for June delivery was down 27 cents at $115.79 a barrel. On Tuesday, the May contract hit a record $119.90. London Brent crude for June delivery was down 33 cents at $114.01.

There were still some supply concerns, however, as the planned strike at Ineos' 200,000-bpd Grangemouth refinery in Scotland, due to start on Sunday, means the plant is being closed down, causing rallies in the gasoline market and stirring worries over an imminent fuel shortage. Workers at the refinery, which supplies BP (nyse: BP - news - people )'s Forties processing plant, are threatening strike action as recent talks over pension disputes failed to yield any results.

'Despite the potential seriousness of the upcoming UK work action, we would not be buying into the market here,' said MF Global analyst Ed Meir. 'We believe that there will be tremendous pressure on the two sides to settle, and even if they don't, these kind of strikes tend to be short-lived affairs. Other factors that make us cautious about further upside at this point, is the renewed vigour the dollar seems to be showing,' he added.

http://www.forbes.com/markets/feeds/afx/2008/04/25/afx4933564.html