BP, the oil giant, has been forced to shut down the biggest oil field in the United States - at Prudhoe Bay in Alaska - after discovering "unexpectedly severe" rust and a leak in a pipeline.

In the latest setback to hit its American division, already reeling from hurricane and fire damage and allegations over propane trading, BP said the shutdown would cut output by about 400,000 barrels of oil a day.

This is equivalent to about 8 per cent of US daily output and could knock in a big dent in Alaska's economy.

The move sent the price of west Texas crude up $1.25 from Friday's close to $76.01 and the price of BP shares dwon 1.7 per cent to 625.5p.

Having begun the shutdown yesterday, BP acknowledged it would take "days to complete". The oil group said at this stage it was unable to say for how long Prudhoe Bay would be shut.

Bob Malone, the newly appointed chairman and president of BP America, said: "We regret that it is necessary to take this action and we apologise to the nation and the State of Alaska for the adverse impacts it will cause.

"We will not resume operation of the oil field until we and governmment regulators are satisfied that they can be operated safely and pose no threat to the environment."

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BP said it decided to shut down Prudhoe Bay, which is expected over its lifetime to produce 14 billion barrels of oil, after data it received on Friday revealed 16 anomolies in 12 locations at a transit line on the eastern side of the field.

Follow-up inspections discovered a leak and a "small spill" estimated at between four and five barrels, BP said.

BP said the spill had been contained and a clean-up effort was under way. It added that it had notified all the relevant authorities.

The world's second largest oil group, which operates 22 miles of oil pipelines at Prudhoe Bay, said it was mobilising additional resources to speed up inspections at those sites it had yet to investigate.

But the spill is the second to hit BP's Prudhoe Bay field this year. In March it discovered a large spill and has already commited to replace a three-mile section of pipeline as a result.

Last month BP raised the amount it is to spend on overhauling safety procedures at the American subsidiary by $1 billion to $7 billion. Its US credibility has suffered a buffeting over the past 18 months.

Last year, a fatal fire forced BP to shut down its Texas refinery, the knock-on effect of which is ongoing with full production there yet to resume.

Hurricanes in the Gulf of Mexico last summer also caused extensive damage. The combined effect of hurricanes Rita, Wilma and Katrina has presented BP with a repair bill seen at $900 million at the last count.

Most recently BP has had to contend with claims that some of its traders were involved in alleged price fixing in the market for propane trading. BP has strenuously denied any wrongdoing and called in a team of external auditors to examine compliance procedures.

Lord Browne of Madingley, BP's highly respected group chief executive, is to retire at the end of 2008, despite calls from several shareholders for him to stay.

Simon Wardell, oil analyst at Global Insight, said: "The decision to shut in operations completely does indicate that the company is now looking to end the speculation and constant criticism once and for all by implementing needed repair work.

"With two possible criminal investigations pending and further scrutiny of the company's operations guaranteed, BP still has five months to go in a year it would rather forget."

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