By Bruce Nichols and Joshua Schneyer
HOUSTON/NEW YORK (Reuters) - Divers found a crack in the Eugene Island oil pipeline, shut due to a leak last weekend, and operator Royal Dutch Shell said on Wednesday it was formulating a plan to repair and restart the key Gulf of Mexico supply link.
"The release point of crude oil from the Eugene Island Pipeline System in the Gulf of Mexico was located by divers who found a crack in the system's 20-inch pipeline," Shell said in a release. "A repair plan is being developed."
Shell offered no details on the extent of the crack in the 20 inch diameter line nor potential repair plans nor an estimated date for restart. The U.S. Minerals Management Service, which must approve any repair and restart plan, said it does not expect one this week.
"I don't expect we will receive any repair plans this week," said spokeswoman Eileen Angelico for the MMS.
A source familiar with pipeline operations said that since the leak was in relatively accessible 60-foot (18-meter) deep water, repairs could take as little as a day or several weeks, depending on the severity of the problem.
Offshore pipeline repair experts said it could be as simple as welding a sleeve over the crack, although sometimes fashioning a sleeve for a particular line can take time.
The 154-mile (248-km) line, built in 1976, has a capacity of 173,000 barrels per day (bpd) and was carrying 100,000 bpd at the time the leak was discovered and the line shut down Saturday.
An estimated 1,400 barrels leaked at the site 33 miles off Louisiana, 60 miles southwest of the pipeline's Houma terminus, Shell said. Cleanup crews were working to control the spill.
A Coast Guard spokesman said cleanup was going well and the spill was "very unlikely" to reach shore, but he said Shell still could be fined for the incident.
The U.S. cash crude market reacted to the shutdown Wednesday, with Bonito, a crude similar to Eugene Island, dealing for $2.50 a barrel over West Texas Intermediate for September, an unusually high premium. No deals were heard for EUI, but assessments put offers at +$2.50.
MMS, the Department of Transportation and the Coast Guard will be involved in investigating the leak and approving any restart plan, officials said.
The flow on Eugene Island pipeline recently was increased when production from Chevron's Tahiti platform started in May. A spokesman did not know whether the increase had anything to do with the leak.
There are alternative routes available for Eugene Island oil, but sources said the flow from Tahiti had limited options because of difficulties the platform has had with start-up. Tahiti also has been flowing into the Mars system.
Shell is 23 percent owner and operator of the line. A number of other oil companies, including ExxonMobil, ConocoPhillips and Marathon, have interests in it.
(Editing by David Gregorio)
