Refinery strike may halve UK NSea oil output

A strike planned this weekend at a major Scottish refinery would force the closure of the key Forties North Sea pipeline, its owner BP said on Thursday, halving Britain's crude oil output.

Talks to resolve the dispute at the 200,000 barrel-a-day Grangemouth refinery, which collapsed late on Wednesday, are unlikely to resume and the two-day strike over pensions is set to go ahead from Sunday, trades union officials said.

The refinery has been gradually shutting down all week and the nearby Kinneil Forties crude oil processing facility will have to close, along with the pipeline, before the heat and power station at the Grangemouth is shut on Saturday.

"Without the power and steam, we can't keep the Kinneil operation running and so we would have to shut down," a BP spokesman said.

The 700,000 barrel-a-day Forties pipeline carries about half of Britain's North Sea oil production.

BP has said that it would need to start shutting the pipeline about 24 hours before the shutdown of the Grangemouth power station.

GAS PRODUCTION TO BE HIT TOO

Closure of the pipeline would also hit Britain's gas production from fields connected to the Forties system, equivalent to about 30 percent of current gas demand, according to the UK offshore oil and gas industry.

"This dispute cannot be allowed to disrupt the nation's oil and gas production and we urge the parties involved to take the necessary steps without further delay to ensure it does not," Oil & Gas UK's chief executive, Malcolm Webb, said in a statement.

Webb said the government stood to lose tens of millions of pounds in tax revenue every day if the fields were shut and warned it would take time to restart production after the strike ended.

"Restarting cannot happen at the flick of a switch," he said. "It would take several days to re-start safely."

British gas prices surged over 10 percent on Thursday on worries about North Sea supplies.

The National Grid said any closure of the refinery should not cause gas supply shortages as demand is low due to the spring weather and alternative supplies are available.

The strike has led to queues at petrol stations in Scotland as drivers filled up ahead of the weekend.

Business Secretary John Hutton told parliament on Thursday that fuel stocks and imports should be sufficient to maintain supplies during the strike at the refinery.

"Industry has also advised us that, at present, fuel stocks at Grangemouth, together with imports of finished product through Grangemouth to replace lost production should be sufficient to maintain supplies through the period of the industrial action and the consequent restarting of the plant," Hutton told parliament.

Production at the refinery has completely stopped as units shut gradually over the last week, the UNITE trade union said.

The plant's owner Ineos was not available for comment.

Around a quarter of the refinery's output is diesel and worries about the impact of the strike sent London gas oil futures, a benchmark for European diesel and jet prices, rallying to a new record high of $1,080.75 a tonne.

Barges of diesel fuel in Europe's Amsterdam-Rotterdam-Antwerp refining hub traded at premiums of at least $51 per tonne to benchmark London ICE gas oil, an $11 gain from the previous evening.