(Updates with details, comment, market reaction)
LONDON, Dec 11 (Reuters) - Britain's largest oil pipeline could shut down for weeks for unscheduled repair work, sending the price of crude to new two-year highs and triggering a steep rally in natural gas prices, just as a cold snap sweeps the country.
The Forties Pipeline System, which carries around 450,000 barrels per day of Forties crude from the North Sea to the Kinneil processing terminal in Scotland, had been operating at reduced capacity since December 7 when a routine inspection revealed a small leak.
Ineos, a privately owned Anglo-Swiss chemicals company, owns the pipeline and said it had taken the decision to close the system completely.
Oil traders estimated this was the first total closure since 2011, when then-operator BP shut it down while a suspected World War II bomb was removed from the seabed.
"It's early days and it is premature to give a time frame for the repair work. We can't give a precise estimate other than to say it is a matter of weeks, rather than days," an Ineos spokesman said.
Ineos bought the Forties Pipeline System (FPS) from BP less than two months ago for $250 million.
The pipeline, which handles nearly a quarter of total North Sea crude output, is also a major route for bringing natural gas to Britain that has been produced offshore.
Britain is in the grip of a cold front that has brought heavy snowfall and prompted the closure of schools and disrupted travel across the country.
Ineos, which also owns the 200,000-barrel per day Grangemouth refinery in Scotland, said the plant would have to seek "alternative supplies of crude," but that there was enough oil currently in storage at Grangemouth for the company to "manage the situation."
Fiona Legate, a senior analyst for the North Sea oil industry at consultant Wood Mackenzie, said even a temporary shutdown of the pipeline would have wide-reaching implications for the UK oil and gas industry.
"FPS transports liquids from over 80 fields, including the two largest producers in the UK - Buzzard and Forties," she said.
"The bulk of throughput from FPS comes from 10 fields ... In 2017, FPS transported more than 40 percent of liquids in the UK Continental Shelf."
The price of Brent crude oil rose by nearly 2 percent on Monday to its highest since mid-2015, around $65 a barrel, while prices of Forties on the physical market traded at four-month highs.
Forties is the biggest of the five North Sea crude oil streams that underpin the dated Brent price benchmark. (Reporting by Amanda Cooper; Editing by Adrian Croft)