Alyeska Pipeline reduces TAPS oil flow again

Alyeska Pipeline Service Co. has curtailed throughput through the Trans Alaska Pipeline System an additional 25,000 b/d to bring the total reduction since April 24 to 75,000 b/d, or 15 percent, a company official told a state legislative panel last week.

TAPS has previously been moving about 490,000 b/d. The reduction, known as “pro-rationing,” is being shared equally among four connection points to producing fields on the North Slope, Betsy Haines, Alyeska’s Senior Vice President for Operations and Maintenance, told the House Resources Committee in a briefing.

Haines also told legislators that Alyeska has done recent analyses that show it could, with additional investments in technology, operate TAPS down to a 200,000 barrels per day throughput level. In its current configuration throughput can be reduced to 300,000 barrels per day without operational issues, particularly in summer when warm temperatures reduce the threat of freezeups.

The throughput reduction was done to manage a buildup of crude oil in storage tanks at the Valdez Marine Terminal, Haines said. Alyeska has 14 storage tanks at the terminal with 6.6 million barrels of working storage capacity. There were 5 million barrels of storage at Valdez as of May 7, according to Alaska Department of Revenue reports.

“In recent months we have experienced suppressed demand,” from U.S. west coast refineries, she said. “TAPS is not designed as an oil storage facility, so we do 28-day and 60-day ‘outlooks’ on demand and tanker movements to prevent a buildup of high inventories at Valdez. We consider anything above 75 percent of tank capacity as high inventory,” Haines told the legislators.

With its forecasts Alyeska has estimated a potential high inventory point in late May, so the decision was made in late April to cut throughput by 10 percent to slow the inventory buildup. That has now been increased to 15 percent.

Whether the curtailment will end or be reduced later this month depends on the market situation, Haines said.

In a related development ConocoPhillips said it will reduce its North Slope production by 100,000 barrels per day beginning in late May and extending through June.

Alyeska may or may not end its throughput reduction so the cut in output by ConocoPhillips will be in addition to the reduction forced on producers by the TAPS curtailment.

However, if the two events do coincide the ConocoPhillips reduction will be accounted for in its share of the pro-rationing among producers by Alyeska.

In managing its reduction ConocoPhillips can only reduce output from the Kuparuk River and Alpine fields, where it is the field operator as well as near 100 percent owner.

The company also owns over a third of Prudhoe Bay, however, but cannot reduce its share of Prudhoe production, under field agreements, unless the other two owners, BP and ExxonMobil, reduce their production in tandem.

If TAPS does extend its curtailment into June the cumulative effect, with the ConocoPhillips’ reduction, would be over 100,000 barrels per day. That could bring TAPS throughput down to the 300,000 barrels pw day level. However, TAPS has operated at those levels during summer months in previous years when there were heavy schedules of process plant “turnarounds,” or major maintenance. During those projects portions of the producing fields are temporarily shut down, which reduced pipeline throughput.

Haines told legislators that low throughput can be managed more easily in summer than in fall, winter or spring when cold weather can freeze water that accumulates at certain points in the pipeline, or can exacerbate problems with the buildup of wax.

TAPS was built in 1977 and was designed to move 2 million b/d. In recent years modifications to pump stations have allowed it to operate efficiently at lower throughput rates. TAPS has been operating at about 500,000 barrels per day until the recent curtailments.

Haines said that although Alyeska’s recent studies show it could mechanically operate at levels down to 200,000 barrels per day this does not take economics into account.

With fewer barrels being moved, TAPS’ fixed costs translate to a higher per-barrel tariff charged to producers, which depresses the “wellhead” value of oil on the North Slope and the ability of field operates to produce profitably, particularly at lower crude oil prices.