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Trimming back 60 jobs at Alyeska to go in 2010 as pipeline oil flow continues to decline; pump station 1 electrification to be delayed by one year Alan Bailey Petroleum News
As production from aging oil fields such as Prudhoe Bay and Kuparuk on Alaska’s North Slope continues to decline, the corresponding year-on-year decline in oil flow through the trans-Alaska oil pipeline creates a continuous challenge for pipeline operator Alyeska Pipeline Service Co., as the company tries to level out the cost per barrel of delivering North Slope oil to market, while operating costs are spread across progressively fewer barrels of oil.
And in the latest twist in this battle to reduce pipeline operating costs while maintaining pipeline safety and integrity, Alyeska has identified $101 million in cost savings for 2010 as a result of revisions to its long range plan, Alyeska Corporate Communications Director Michelle Egan told Petroleum News Nov. 10.
“We have the challenge of declining throughput … and the need to change some of our assumptions and the way that we do business in order to be able to be viable as a pipeline well into the future,” Egan said.
Some of the cost savings will come from a reduction in staffing levels, with Alyeska cutting 60 work positions in 2010. Roughly half of the positions will be those of Alyeska staff, with the other half consisting of contractor positions, Egan said.
Alyeska is trying to minimize the impact of the job cuts on individuals — half of the impacted Alyeska positions are currently vacant. And, sometimes, if a position has been vacant for a while, people are able to devise workarounds, Egan said.
“We’ve asked people in each department and division to look at efficiencies, look at open positions,” Egan said.
Pump station 1 As part of its review of its long range plan, Alyeska has decided to delay a major upgrade of pump station 1, at the North Slope end of the pipeline, with the upgrade now slated for completion in 2013 rather than 2012, as previously planned, said Mike Joynor, Alyeska vice president for pipeline oil movements and engineering.
The pump station 1 upgrade is part of Alyeska’s strategic re-configuration program, a program that forms a major part of the company’s response to declining oil throughput. Strategic re-configuration involves the modification of the pipeline pump stations to use electrically powered pumps, rather than the original turbine powered pumps, and the upgrade of the pipeline control systems to use modern communications and computer technology, with centralized operational control and monitoring of the pipeline now conducted remotely from a control center in Anchorage.
Electrification of the pipeline pumping systems enables the pipeline operations to respond flexibly to varying pipeline throughputs, while upgrade of the control systems is enabling major de-manning of the pump stations.
In fact, the newly announced job cuts form part of a general trend toward reduced staffing levels, enabled in part by the effects of strategic re-configuration, Joynor emphasized. Alyeska had staffed up in 2005 and 2006 to conduct major re-configuration work, and the results of that work are starting to kick in, he said.
One at a time As part of the re-configuration program, Alyeska has been electrifying the pump stations one at a time, using the experience gained from the modification of each pump station to refine the plan for upgrading the next pump station. The new electrically powered pumps went into operation at pump station 9 in February 2007, with pump station 3 starting its electric pumps in December of that year, and pump station 4 following suit in 2009.
Alyeska had planned to start the electrification of pump station 1, the only operational pump station remaining to be converted, in 2010, with the new systems coming on line in early 2012.
Located at the intake end of the pipeline, with connections to feeder lines from the North Slope oil fields, and having metering systems and crude oil storage tanks, this particular pump station is significantly more complex than the others, Joynor said.
And, with the re-configuration plan for pump station 1 having been developed in 2005, prior to the experience of converting any of the pump stations, Alyeska has decided to completely re-evaluate its plans for pump station 1, even although that re-evaluation will delay the start of work on the pump station until 2011.
“What we’ve done is backed up and done a complete evaluation of the engineering packages and things of that nature,” Joynor said.
Low-flow study Factoring into the decision to delay the pump station 1 work is the desire to see the results of a current study into the impact on the pipeline system of low oil flow rates, before finalizing the pump station 1 plans, he said.
The low-flow study, started in August 2008 and scheduled for completion in 2010, is investigating how the declining speed at which oil will flow down the pipeline in the future will impact factors such as oil temperatures, wax deposition and the possible dropping out of water and sediment inside the line, factors possibly requiring revised oil quality standards and the installation of new ancillary pipeline equipment.
It seemed prudent to delay the pump station 1 conversion to enable any new operational assumptions to be incorporated into the conversion plans, Joynor said. In addition, Alyeska will be replacing two of the feeder pipeline connections at the pump station in 2010: Trying to do that major project at the same time as the strategic re-configuration project increases the potential for a safety or pipeline integrity incident, he said.
And because much of the re-configuration work must be done outside, in summer conditions, the work will require two summer project seasons for completion.
“The project will be a 24- to 30-month effort, but we’ll get started on it in 2011,” Joynor said.
Budget cuts The deferral of the pump station 1 re-configuration, coupled with some new efficiency gains identified in other projects in Alyeska’s long range plan, will result in Alyeska’s capital budget for 2010 dropping by $46 million, compared with the capital budget for 2009, Joynor said.
And the 2010 job cuts, together with some revenue savings resulting from the deferral of project work, will result in a revenue budget reduction of $55 million in 2010, relative to 2009, said Egan.
Taken together, the cuts in the capital and revenue budgets add up to that overall anticipated cost reduction of $101 million, a cost reduction that must be viewed in the context of a pipeline throughput decline from a peak of 2.1 million barrels per day in 1988 to around 700,000 barrels per day at present.
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