Alyeska Pipeline reduces TAPS oil flow in response to soft market conditions

Alyeska Pipeline Service Co. has ordered a 25 percent reduction of Trans Alaska Pipeline throughput by beginning Saturday, Oct. 3. State officials were informed of the decision Oct. 1.

It will be in effect until Oct. 6, an Alyeska spokesperson said in an email.

TAPS was moving about 490,000 barrels per day over the last three days of September. The effect of the reduction will be to cut throughput, and North Slope production, to about 367,000 barrels per day.

The action is being taken to reduce high inventories of crude oil in storage at the Valdez Marine Terminal. As of Oct. 1, there were 5.1 million barrels of crude oil in storage at Valdez, according to state Department of Revenue data. There is capacity for about 6.5 million barrels in tanks at the terminal.

Alaska Revenue Commissioner Lucinda Mahoney told state legislators during a Oct. 2 hearing on state finances that Alyeska’s decision was made out of concern for the continuing low levels of fuel demand and a projected buildup of inventory at West Coast refineries.

The pipeline company sometimes acts to lower inventory based on forecasts of reduced demand from shippers and refineries that show an expectation of rising inventory of crude oil in storage at refineries. That would cause the refineries, which buy Alaska crude to reduce tanker shipments, which then increases the amount of oil that has to be stored at Valdez.

Alyeska’s procedure of “prorationing” a throughput cut distributes the reduction equally among four intake points for field pipelines on the slope. The effect is to distribute the cut among major producing fields and companies.

“Alyeska has communicated this action to the TAPS North Slope producers. Alyeska made this decision after considering associated risks,” due to market conditions, Michelle Egan, spokesperson for the pipeline company, said in the email.

“Monitoring inventory at the Valdez Marine Terminal is a routine part of daily operations. Inventory can fluctuate based on many factors, including shutdowns or operational upsets, incoming flow rates, weather impacts on loading, and tanker schedules,” Alyeska said.

Under the throughput proration procedure Alyeska reduces and amount of crude oil it accepts at four “connector” points with field pipelines on the North Slope. Basically, slope producers share the reduction.

Alyeska imposed a similar reduction last spring when low demand from refineries led to a buildup of inventory in Valdez.

ConocoPhillips imposed its own voluntary 100,000 b/d cutback of production from North Slope fields it controls in early summer, but has since lifted the restriction.