April 7, 2009 / 1:15 AM / 11 years ago

UPDATE 1-Alaska volcano forces Chevron Cook Inlet stoppage

(Changes dateline from previous SAN FRANCISCO; adds quotes, detail, future terminal operations, byline)

By Yereth Rosen

ANCHORAGE, Alaska, April 6 (Reuters) - Chevron Corp (CVX.N) has suspended production from its Cook Inlet oil operations in Alaska after eruptions at Mount Redoubt Volcano forced an indefinite shutdown at a tank farm it uses for storage.

The company normally produces about 7,500 barrels a day from the 10 offshore platforms it operates in Cook Inlet, but it suspended all production after Redoubt exploded for the 19th time early Sunday morning.

That interrupted a tanker-loading operation at the Drift River Oil Terminal that had been intended to free up some storage capacity.

The Drift River terminal, on the western shore of Cook Inlet, is operated by Cook Inlet Pipe Line Co, which is owned by Chevron and Pacific Energy Resources PFE.TO.

The terminal had been closed since March 22, when Redoubt began erupting. Chevron, which operates the offshore Granite Point, Trading Bay and McArthur River oil fields, has since struggled with storage space. The company cut production at the mature fields in response to the volcano problems, and a week ago shut in two of its platforms.

Unlike Chevron, Pacific Energy Resources has not curtailed Cook Inlet oil production because it has adequate alternative storage, a spokesman said.

The company operates the Redoubt Shoal unit, which has about two months of remaining storage capacity, said David Hall, the company’s Alaska production manager.

Chevron is considering ways to restart production without using Drift River, spokeswoman Roxanne Sinz said. “At this point, we’re taking a look at some options,” she said.

The Drift River terminal lies at the mouth of a river that flows from the volcano. The Drift River valley is subject to lahars — mudslides and floods created when volcanic explosions melt the snow and ice on the 10,197-foot peak.

Environmentalists see a risk of spills from the terminal’s oil-laden tankers.

So far, the terminal’s containment system has protected the oil tanks, officials said at a news conference on Monday. “It’s held up quite well. It’s taken two big punches from lahars, and it continues to do its job,” Gary Folley of the Alaska Department of Environmental Conservation said.

Over the weekend, the terminal briefly reopened to allow a Tesoro Corp. TSO.N tanker to load some of the 148,000 barrels of crude oil that had been stranded since Redoubt started erupting last month.

The tanker loaded 87,603 barrels of crude oil — about 60 percent of the amount stored at Drift River — but Sunday’s explosion precluded plans to do anything more, officials said.

“The risk to people at this point outweighs the benefit of any additional effort” to bring more oil into the terminal from the platforms, U.S. Coast Guard Captain Mark Hamilton said.

Plans for future terminal operations are unclear, said Rod Ficken, vice president of Cook Inlet Pipe Line. “We don’t have an idea exactly what will happen. We will wait for the volcano to rest,” Ficken said.

Oil from the Drift River terminal is usually shipped by tanker to Tesoro’s refinery in nearby Kenai. The normal schedule is for a Tesoro tanker to load up with crude at Drift River about once a month.

Explosions at Redoubt, a volcano 106 miles southwest of Anchorage, have sent ash clouds as high as 10 miles into the sky, dusted cities and small communities and forced numerous flight cancellations and a brief shutdown of Anchorage’s international airport. (Reporting by Yereth Rosen; Editing by Gary Hill)

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