Exxon shuts down oil production as Santa Barbara cleans up spill

Exxon Mobil is halting production at three offshore oil platforms because it has no way to transport its crude. In May, a pipeline breach spilled an estimated 100,000 gallons of oil along the scenic Santa Barbara coast.

Exxon Mobil Corp. has shut down production at three offshore oil platforms until it can come up with a way to resume transportation of the crude that was interrupted last month by a pipeline break that fouled a stretch of the Pacific coast of California’s Santa Barbara County.

Until the pipeline is repaired, Exxon had hoped to use tanker trucks, each with a capacity of 6,720 gallons, to make up to 192 trips per day to transport the oil to from a company facility near the Pacific coast to several destinations, including an oil refinery in San Luis Obispo County, about 70 miles to the north.

Exxon had filed an emergency application with the county to bring the trucks into service, but Dianne Black, the assistant director of planning and development for Santa Barbara County, rejected the effort, saying the situation wasn’t an emergency. Instead, she said the company must go through normal channels, which include a long environmental study, to obtain a permit to move the oil by truck. (Related: Growing India Becomes Major LNG Player)

Because the oil cannot move, Exxon was forced to suspend operations at the three offshore rigs last week, company spokesman Richard Keil said June 23.

Tom Kloza, the global director of energy at the Oil Price Information Service, said the rigs’ shutdown shouldn’t affect retail fuel prices in Southern California, but it will take a modest financial toll on Exxon. He noted that crude oil was selling last week for up to $64 per barrel, but the price could exceed $90 by the time it’s refined for gasoline, meaning Exxon could lose money until the pipeline is repaired. (Related: 2015 Could Be The Year Of Peak Oil)

“I’m sure it’s a royal pain for them,” Kloza told The Associated Press. “Given the profit margins for gasoline, whether you have to [deliver] it by wheelbarrow or rickshaw, you’re very motivated.”

 

Still, production at the three platforms is estimated at only about 30,000 barrels a day, a very small proportion of the 1.7 million barrels per day of crude needed by California.

On May 19, a badly corroded conduit owned by Plains All American Pipeline of Houston breached, spilling an estimated 100,000 gallons of oil that fouled a stretch of the scenic Santa Barbara coastline and created tarballs that reached as far as Los Angeles County about 100 miles away. The spill also is being held responsible for the deaths of more than 100 marine mammals and almost 200 birds. (Related: Investors Should Prepare For The Long Infrastructure Boom)

Soon after the spill, Exxon already had reduced production from the three platforms by nearly two-thirds and began storing the crude they did produce in large tanks. But those facilities “are filled up right now,” according to Devin Drude, the director of the county’s energy division.

Exxon’s three platforms aren’t the only rigs that have suspended work. Four other platforms owned by two other companies also have been forced to halt nearby operations. A platform owned by Venoco Inc. shut down just a few days after the pipeline spill, and three platforms owned by Freeport-McMoRan also have suspended operations for the past several weeks.

By Andy Tully Of Oilprice.com

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