Prudhoe Shutdown Won't Idle Oilfield Service Cos Initially

Aug 08, 2006 (Dow Jones Commodities News via Comtex)

Oil-services companies working in Alaska's Prudhoe Bay field aren't expected to be idle, initially at least, as BP PLC (BP) shuts the field down indefinitely to repair its corroded pipeline system.

Many of the major oil-services companies, including Schlumberger Ltd. (SLB) and Halliburton Co. (HAL), work in the region, according to BP.

Pickering Energy Partners analyst Dave Pursell said there likely will be plenty of tasks, such as well maintenance, for the services companies to perform during a production shutdown that lasts up to three to four months.

Baker Hughes Inc. (BHI) spokesman Gene Shiels concurred that the initial shutdown likely won't result in a big financial hit to oil-services companies working in the region, although he said it could become a problem for them after about five weeks.

Shiels wasn't immediately certain how much work, if any, Baker Hughes does in the region.

BP hasn't provided a timeline on how soon the field will be brought back online. Observers have said it likely will take several weeks or more.

The actual repair work on the pipeline is expected to go to a major construction company or pipe manufacturer because oil-services companies are mostly involved in oil production and drilling. BP PLC (BP) has said it plans to replace 16 miles of its transit lines for Alaska's Prudhoe Bay field.

Still, "if you shut a field down [to production] for three to four months, I don't think works stops" for the services companies, Pickering's Pursell said. "There's a lot of maintenance to do, so it's maybe an opportunity to take advantage and do some well work."

He said new wells also could be drilled during the shutdown so that they are ready to produce when the field opens again.

Baker Hughes' Shiels agreed, provided the field is back up sooner rather than later.

"If the pipeline is repaired and back running in relatively short order, in terms of the services firms it should not be a big impact," he said. A period of three to five weeks "is a manageable situation."

BP spokesman Scott Dean said Tuesday that it is uncertain at this point what impact the production shutdown will have on other oil-field activities.

"Having said that, we are committed to investing a lot of money to make sure that field is safe," Dean said. "There's going to be a lot of work to do."

Regardless, Pickering's Pursell said the shutdown could end up being a financial boon to the oil-services sector overall simply because of its affect on oil prices. The estimated 400,000 barrels a day that will be out of production will drive prices higher and increase activity in the sector, he said.

"That's a huge benefit for the entire energy complex," Pursell said. "It means more cash flow, more money to spend [and] more visibility that oil prices are going to stay high for a while."

Copyright (c) 2006 Dow Jones & Company, Inc.

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