NEW YORK (Reuters) – Regardless of what comes next in Libya’s lethal political standoff, the OPEC country’s oil sector is nearly certain to suffer, bringing long-lasting supply disruptions or even permanent damage.

None of several potential outcomes is benign for Libya’s oil industry — the lifeblood of its economy — or for oil prices. The scenarios run the gamut from all-out civil war and attacks on energy infrastructure to low-level neglect and reservoir damage, as foreign expertise flees the country.

Over decades, from Iran, to Iraq and Venezuela, periods of political chaos in OPEC countries have usually carved lasting scars on the oil sector, and few expect Libya to be any different.

“A period of chaos will probably interrupt Libya’s refining and oil operations,” said Amy Jaffe, an energy studies fellow and Middle East expert at Rice University in Houston. “The military is abandoning Gaddafi, so it’s unclear who is left to protect oil installations. Lots of foreigners are being evacuated, so who will remain in place capable of operating Libya’s oil industry? Will workers even show up?”

As Africa’s No. 3 producer and the site of the continent’s largest proved reserves, estimated at 44 billion barrels, Libyan oil usually accounts for 2 percent of world output.

The country, whose oil accounts for a fourth of Italy’s demand, is the first major oil exporter to be thrust into acute turmoil since protests began sweeping through the Middle East in January, unseating presidents in Tunisia and Egypt so far.

An estimated 300,000 barrels per day (bpd) of Libya’s 1.6 million bpd of production has been halted, as companies evacuate staff and suspend operations. Much of the country’s oil industry is run by foreign firms including Eni and Repsol, while Libya’s National Oil Corporation (NOC) has traditionally been tightly controlled by Gaddafi.

NEW YORK (Reuters) – Regardless of what comes next in Libya’s lethal political standoff, the OPEC country’s oil sector is nearly certain to suffer, bringing long-lasting supply disruptions or even permanent damage.

None of several potential outcomes is benign for Libya’s oil industry — the lifeblood of its economy — or for oil prices. The scenarios run the gamut from all-out civil war and attacks on energy infrastructure to low-level neglect and reservoir damage, as foreign expertise flees the country.

Over decades, from Iran, to Iraq and Venezuela, periods of political chaos in OPEC countries have usually carved lasting scars on the oil sector, and few expect Libya to be any different.

“A period of chaos will probably interrupt Libya’s refining and oil operations,” said Amy Jaffe, an energy studies fellow and Middle East expert at Rice University in Houston. “The military is abandoning Gaddafi, so it’s unclear who is left to protect oil installations. Lots of foreigners are being evacuated, so who will remain in place capable of operating Libya’s oil industry? Will workers even show up?”

As Africa’s No. 3 producer and the site of the continent’s largest proved reserves, estimated at 44 billion barrels, Libyan oil usually accounts for 2 percent of world output.

The country, whose oil accounts for a fourth of Italy’s demand, is the first major oil exporter to be thrust into acute turmoil since protests began sweeping through the Middle East in January, unseating presidents in Tunisia and Egypt so far.

An estimated 300,000 barrels per day (bpd) of Libya’s 1.6 million bpd of production has been halted, as companies evacuate staff and suspend operations. Much of the country’s oil industry is run by foreign firms including Eni and Repsol, while Libya’s National Oil Corporation (NOC) has traditionally been tightly controlled by Gaddafi.

NEW YORK/LONDON (Reuters) – Oil traders are almost unanimously betting that Europe’s Brent crude will retreat from its record $16 premium over U.S. benchmark oil. What they don’t expect for years, however, is a return of West Texas Intermediate premiums that have been the norm for decades.

Shifts in physical oil flows and new supply risks — increasing the chance of oil gluts in the U.S. Midwest and tighter supplies in Europe – mean that a highly unusual $5 to $10 a barrel premium for Brent could become the standard through 2013.

It’s not the first time Brent has achieved wide premiums. WTI plunged to discounts near $10 a barrel for several brief periods in 2009, as traders sold off the contracts near their expiry dates due to sparse storage space in Oklahoma.

But this time could be different, traders and analysts say, with Brent sustaining a longer-lasting, structural premium.

Ample new oil storage capacity is being added to WTI’s landlocked delivery hub in Cushing, Oklahoma. That means discounts are now less a function of tight storage capacity and more reflective of record volumes of shale oil and oil sands crude flowing in to create a supply cushion that may not be drawn down until new pipelines can siphon crude off to the Gulf Coast.

“A Brent premium is the new normal in oil markets,” said Ed Morse, head of commodities research at Credit Suisse. “It’s a combination of the ample supply situation in PADD II (the U.S. Midwest) and Brent’s market tightening. WTI’s once normal premium is over.”

Until new pipes link Cushing to the coast around 2013, Europe’s benchmark may sell for an average $5 to $8 a barrel advantage, Morse said, roughly reflecting the cost of moving barrels from Cushing to the coast by railroad or tanker truck.

NEW YORK/LONDON (Reuters) – Oil traders are almost unanimously betting that Europe’s Brent crude will retreat from its record $16 premium over U.S. benchmark oil. What they don’t expect for years, however, is a return of West Texas Intermediate premiums that have been the norm for decades.

Shifts in physical oil flows and new supply risks — increasing the chance of oil gluts in the U.S. Midwest and tighter supplies in Europe – mean that a highly unusual $5 to $10 a barrel premium for Brent could become the standard through 2013.

It’s not the first time Brent has achieved wide premiums. WTI plunged to discounts near $10 a barrel for several brief periods in 2009, as traders sold off the contracts near their expiry dates due to sparse storage space in Oklahoma.

But this time could be different, traders and analysts say, with Brent sustaining a longer-lasting, structural premium.

Ample new oil storage capacity is being added to WTI’s landlocked delivery hub in Cushing, Oklahoma. That means discounts are now less a function of tight storage capacity and more reflective of record volumes of shale oil and oil sands crude flowing in to create a supply cushion that may not be drawn down until new pipelines can siphon crude off to the Gulf Coast.

“A Brent premium is the new normal in oil markets,” said Ed Morse, head of commodities research at Credit Suisse. “It’s a combination of the ample supply situation in PADD II (the U.S. Midwest) and Brent’s market tightening. WTI’s once normal premium is over.”

Until new pipes link Cushing to the coast around 2013, Europe’s benchmark may sell for an average $5 to $8 a barrel advantage, Morse said, roughly reflecting the cost of moving barrels from Cushing to the coast by railroad or tanker truck.

NEW YORK (Reuters) – A U.S. government investigation of the Trans Alaska oil pipeline, which delivers 12 percent of domestic oil supply, has found potentially major safety issues on the line that make its operation risky until repairs are made, according to a letter from regulators to the operator, and obtained by Reuters.

In the February 1 letter addressed to operator Alyeska from the U.S. Department of Transportation’s pipeline safety division, regulators said the 800-mile line appears to have “multiple conditions” that “pose a pipeline integrity risk to public safety, property or the environment.”

The investigation follows a January 8 leak on the line that forced it to shut down for several days in precarious winter conditions.

The letter, called a “notice of proposed safety order,” requests that Alyeska, whose top stakeholder is oil major BP Plc, take several measures to mitigate risks along the line, including replacing some piping. DOT told Alyeska to expect a forthcoming “safety order,” requiring action.

“It appears that the continued operation of the affected pipeline without corrective measures would pose a pipeline integrity risk to public safety, property, or the environment,” the letter said.

Regulators gave Alyeska 30 days to respond in writing to the notice. They did not order any shutdown of the line or set out enforceable timelines for repairs. DOT told Alyeska it will be allowed to contest the findings of the investigation.

Probes as far back as 2008 found issues including internal corrosion that had thinned pipeline walls by up to 80 percent in some spots, the letter said. While some measures have been taken since to mitigate corrosion risks, closer monitoring is required, the letter said.

NEW YORK (Reuters) – Trains once revolutionized the U.S. oil trade by getting barrels to market faster than horse and buggy. Some 150 years later, crude is hopping the rails again as today’s oil barons look to cash in on the biggest domestic price gap in decades.

Shipments of oil in rail tankers, though still small, may have already doubled from a year ago, industry estimates show. They could soon surge further as producers, railways and storage firms build up to a dozen crude-by-rail terminals, allowing oil from an oversupplied U.S. Midwest to flow to destinations where it’s priced much higher, including on the Gulf Coast.

The incentive is clear: Light oil sold for around $81 a barrel at wells in the Bakken shale of North Dakota this week. After a 1,600-mile rail journey south, which can cost as little as $7 a barrel, the same oil could fetch $104 in Louisiana.

The historic price spread is a result of growing Canadian and North Dakota oil supplies backing up in and around Cushing, Oklahoma, the landlocked oil pricing hub where several big southbound pipelines end in a cul-de-sac.

Cushing tanks held a record 38 million barrels last week, a glut that means crude in Oklahoma and further north is trading at huge discounts to oil at the Gulf Coast refining hub, or across the Atlantic in Europe.

Avoiding Cushing offers major rewards for shippers and oil traders, turning thousands of miles of flexible U.S. rail routes into a lucrative oil transport option for the first time in decades.

“If you can get Bakken crude to Louisiana, you get LLS (Light Louisiana Sweet) prices for it,” said Bill Swann of U.S. Development Group, whose new St. James, Louisiana rail terminal is handling 60,000 barrels per day (bpd) of crude from Bakken.

NEW YORK (Reuters) – A risk assessment of the Trans Alaska Pipeline System in 2008 recommended replacing a stretch of line that leaked this month, since a concrete casing made it impossible to inspect for corrosion, operator Alyeska told a U.S. lawmaker this week.

A leak discovered on January 8 in a concrete-encased booster line along TAPS forced the 800-mile (1,287-km) pipeline system to shut last week, temporarily cutting off 12 percent of U.S. oil production, and forcing a risky winter-time repair. The pipeline restarted on Monday.

The last corrosion inspection on the leaky stretch of line occurred in 2008 but was deemed too risky and halted, operator Alyeska told Rep. Ed Markey, the ranking Democrat in the House Natural Resources Committee, in a letter dated January 18 and given to Reuters on Friday.

“Attempts to inspect the below ground concrete encased piping were stopped in 2008 due to the risk of potential damage to the piping during necessary removal of the concrete encasement,” Alyeska CEO Thomas Barrett wrote.

“A risk assessment completed in October 2008 recommended not removing the concrete, but rather, replacing the pipeline.”

Alyeska said it had planned to replace the stretch of pipe in question as early as this year. In 2009, Alyeska began the design and engineering work needed before replacing the stretch, said spokeswoman Michelle Egan.

“There has been progress made. The work that was required has begun,” she said.

NEW YORK/ANCHORAGE (Reuters) – Last week’s shutdown of the Trans Alaska Pipeline System, a major artery for U.S. oil, may signal trouble ahead for Alaska’s aging oil infrastructure, including more frequent incidents that could damage the environment and cause oil prices to soar.

Workers braved sub-zero temperatures to install a bypass around a small leak at TAPS, allowing the line that ships 12 percent of domestic crude supplies to restart on Monday, and halting the advance of oil prices toward $100 a barrel.

But the smooth fix belies an ominous lesson from last week’s near disaster. Officials and experts said shutdowns at TAPS are becoming more likely as declining Alaskan oil output reduces the flow of crude through the line and makes its riskier to operate.

The stakes are highest during Alaska’s dark and cold winter when even minor repairs are precarious, and when idle oil or debris could freeze in the line, potentially wreaking havoc.

“Flow is the real problem,” said Thomas Barrett, president of TAPS operator Alyeska, in a phone interview. TAPS’ “exposure to cold is increasing with every decline we’ve had in production.”

Last week’s spill along the 800-mile (1,280 kilometer) line was measured at just 317 barrels, but it provided a glimpse at how a future winter shutdown might snowball into calamity.

The incident quickly led to nearly 5 million barrels of oil being shut in. It was the second-longest outage in the line’s history, and the second major unplanned shutdown in eight months, after a much larger spill idled the line last May.

NEW YORK (Reuters) – BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) fixed a tanker cargo of Russia’s ESPO crude for shipment to the U.S. West Coast after a shutdown of Alaska’s main oil pipeline prompted some oil companies to look at foreign crude substitutes, two shipping sources told Reuters on Friday.

BP was said to fix the 115,000 deadweight ton Helga Spirit tanker to load Eastern Siberian pipeline crude on January 20, two shipping sources said. The fixture was done Thursday, one of the sources said.

The tanker would hold around 850,000 barrels of ESPO, a crude trader said. Helga Spirit was last seen moored in southern Japan on Friday, according to AISLive ship tracker on Reuters. ESPO loads at Kozmino Port, near Vladivostok in Russia’s Far East.

BP did not return calls for comment.

The Trans Alaska Pipeline System (TAPS), which normally ships around 640,000 barrels per day — or 12 percent of U.S. oil output — was closed for 84 hours this week, temporarily shutting in most of Alaska’s oil production. The closure followed a small leak discovered on January 8.

Concerns about potential supply shortfalls from Alaska had U.S. West Coast refiners on their feet this week, looking at cargoes that could substitute Alaska North Slope crude if the pipeline problems persisted.

BP, which is also the top producer in Alaska and the top stakeholder in TAPS, has about 500,000 barrels a day of refining capacity on the U.S. West Coast, including in Washington and California.

NEW YORK, Jan 13 (Reuters) – Alaska’s main oil pipeline will shut for 36 hours over the weekend to install a bypass aimed at restoring oil shipments to full volumes after the line was shut following a leak last week, its operator said on Thursday.

Crude flow has been restored to 400,000 barrels per day, about two thirds normal, after operator Alyeska partially resumed shipments earlier this week.

Alyeska plans to install a bypass line that will allow shipments to return to normal rates of 630,000 to 650,000 bpd, or about 12 percent of U.S. oil output. The line will remain near its current, reduced rates until it is shut down for the bypass, the operator said late Wednesday.

The state typically produces more than 600,000 bpd of crude oil, but the idling of the Trans Alaska Pipeline System (TAPS) cut production to as low as 35,000 bpd earlier this week.

As of Wednesday, BP Plc (BP.L: Quote, Profile, Research, Stock Buzz) had restored most oil production in Prudhoe Bay, the largest U.S. oilfield, government data shows.

Alaskan oil production rose to 358,424 barrels on Wednesday, up from 49,717 barrels on Tuesday, according to Alaska’s Department of Revenue.

Alaskan crude stockpiles also rebounded on Wednesday, gaining 13 percent to 2.45 million barrels, from 2.16 million on Tuesday.