Work to close oil pipeline under way

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Preparations are under way for the possible closure of a pipeline that delivers 30% of the UK's daily oil output, BP said today.

The two-day strike at the Grangemouth refinery, which starts on Sunday, could force the closure of BP's Forties Pipeline,

The pipeline, which brings in 700,000 barrels of oil a day from the North Sea, is powered from the Grangemouth site.

A BP spokeswoman said today no decision had yet been made regarding the pipeline.

But she added: "We have begun preparations for the shutdown in case it is necessary."

The pipeline relies on power - electricity and steam - that comes out of the Grangemouth complex."

The firm is examining what the impact of the strike would be on the power supply to the pipeline, which brings in oil from 40 different fields in the North Sea.

About 200,000 barrels a day are pumped directly in to Grangemouth to be refined while the rest is put on to tankers to be taken to other domestic refineries or exported overseas.

Even a short strike will likely result in many more days of reduced production because of the difficulties in stopping and starting the plant.

Business Secretary John Hutton yesterday sought to reassure motorists over the security of oil supplies.

He told the Commons: "Industry has also advised us that at present fuel stocks at Grangemouth, together with planned imports of finished products through Grangemouth to replace lost production, should be sufficient to maintain supplies through the period of industrial action and the consequent re-starting of the plant."

Offshore oil industry body UK Oil & Gas warned that if essential utilities at Kinneil were stopped, some oil and gas production in the central North Sea might have to shut down unnecessarily.

This, it was estimated, could cost £50 million a day in lost production - with the Treasury taking half of that hit.

Malcolm Webb, chief executive of the 67-member oil and gas industry body, said: "We note that discussions are continuing with a view to ensuring the vital utilities needed are made available."

He went on: "If these utilities are not made available to Kinneil, then the Forties Pipeline System (FPS), which transports 700,000 barrels of North Sea production each day, will have to shut down and there will be a knock-on effect on gas production equivalent to about 30% of current UK demand.

"This potential loss of production would have a wholly disproportionate effect on the national economy, losing the UK about £50 million every day, of which foregone tax revenue to the Exchequer amounts to £25 million a day.

"Moreover, if oil and gas production offshore were to be shut down, re-starting cannot happen at the flick of a switch. It would take several days to restart safely."

Holyrood cabinet secretary for finance John Swinney told the Scottish Parliament it had become clear that there could be an "impact" on Kinneil.

"While this plant would be ready to operate soon after the end of the industrial action, there will still be the possibility of disruption to production, which is currently 725,000 barrels of crude oil a day and 80 million cubic metres of gas per day," he said.

"This could place a substantial penalty on upstream production and could affect almost a third of oil producers in Scotland, none of whom are party to the current dispute between Ineos and Unite."