Four Companiess to Jointly Work on Gulf of Mexico Pipeline Repairs

HOUSTON, Jun 7, 2007 (AP)

Four companies that work in the Gulf of Mexico oilfield have formed a partnership they say will allow them to dramatically expedite deepwater pipeline repairs after a hurricane or other emergency, though the equipment won't be available for this storm season.

The cooperative arrangement, announced Wednesday involves pipeline operators Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) and hydrocarbon producers BP PLC (BP) and Eni SPA. They've agreed to buy $12 million worth of equipment that will be used to fix damaged pipelines after a storm or accident.

Mike Stark, director of offshore pipelines for Enterprise Products Partners, said the arrangement will allow the co-owners to have repair systems "readily available" in an emergency.

The concept for the new venture was hatched before hurricanes Katrina and Rita devastated the Gulf in 2005, but it meshes with an industry-wide effort to use lessons learned from the storms and strengthen drilling, pipeline and refining operations in the region.

The U.S. Gulf produces roughly 25% of the nation's oil and 15% of its natural gas, and disruptions after Katrina and Rita caused gasoline prices to spike.

Ray Ayers, a staff consultant at Stress Engineering Services Inc., which will manage the joint project, said having the equipment in place - rather than scrambling to find it, procure it, get it to sea - could reduce the amount of time a pipeline is out of service by 50% to 75%.

Ayers said the initial four companies account for roughly one-fourth of the Gulf's deepwater pipeline capacity. He called the initiative a "hard sell" when it began in 2004 but said it gathered momentum after Katrina and Rita.

"The probability of having that type of major damage is relatively small, but the consequences once you have it are large," he said.

Ayers said he expects other companies eventually to join the cooperative, particularly smaller outfits that couldn't afford to create such a repair mechanism on their own. He said companies now involved have established a protocol for use of the equipment.

Because of the newness of the agreement and the time it takes to acquire it, the arrangement won't be available until next year, Ayers said. The cooperative is deciding whether to let the vendors store the equipment or keep it together in a central location.

"We hope to have it all in place by next hurricane season," he said. "Until then, we'll keep our fingers crossed."

Copyright (c) 2007 Dow Jones & Company, Inc.

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