It’s taken longer than the company estimated, and the total cost has climbed to $434 million, but Alyeska Pipeline Service Co.’s strategic reconfiguration of the trans-Alaska pipeline system, now scheduled for completion in late September, remains a “robust” project for Alyeska and its owners, Lee Monthei told Petroleum News in a Jan. 11 interview.
Monthei, Alyeska’s strategic reconfiguration program manager, said Alyeska re-did cost estimates last summer and then went back through the economic analysis with the pipeline’s owners. Even with the increased cost — the project was originally estimated to cost some $250 million — “rates of return are very robust on this project,” it remains a good project for the producers and “will accomplish what we want it to do in terms of lowering the cost of TAPS.”
The reconfiguration project is aimed at reducing the cost of transporting oil down the 800-mile pipeline from the North Slope to Valdez and extending the economic life of the pipeline by modernizing the system.
It was the lure of lowering operating costs — by 10 percent or roughly $50 million a year — that produced the attempt to fast track the project, which originally had a completion date at the end of 2005, Monthei said.
Jobs are usually sanctioned at the end of preliminary engineering or after design engineering has begun, he said. Conceptual engineering — a rough layout of a job — is followed by preliminary engineering, which “basically puts a lot of meat around some of these conceptual ideas.” That is followed by design engineering.
Pipeline reconfiguration was sanctioned early in preliminary engineering because it was believed that would get the job done a year faster, adding another year of $50 million savings to project benefits.
But as they got further into preliminary engineering, there were scope issues “that weren’t accounted for in the preliminary engineering” and as detailed scheduling was developed it became apparent it would take an additional year to do the job.
“As we got into the project, there were simply a lot of other work-scope items and it just simply took a lot longer to do the detailed engineering and procure a lot of the material than what was initially anticipated,” Monthei said.
Pump motors also an issueThere was also an issue with the main pump motors that impacted the project’s cost and timing.
Initial testing during design showed vibration problems and the fix required “an extensive design revision,” he said, and not only to the motors: “What we had to do was isolate the motor core from the motor frame in order to solve the vibration problem.” That meant the motor was bigger than the original design, “which meant an increase in the size of the modules” and an increase in the number of pilings.
“So that had some very significant cost and schedule ramifications for the project.”
Another change from the initial plan had to do with existing buildings at the pump stations.
The original plan called for doing away with a lot of the buildings because after automation they would no longer be required for housing and support. It turned out that some of them would be needed for things like cold storage, so while buildings will be removed, Monthei said, not as many as Alyeska hoped.
Commodity prices had a big impact on the project’s total cost.
The price of steel, used in piping and cable trays and valves, has gone up substantially over the last three years, he said. And electrical cable and electrical equipment costs have also increased, from 20 percent to as much as 60 percent in three years, with availability also a challenge.
Alyeska spokesman Mike Heatwole said that the difference between doing a brownfield and a greenfield development was also a challenge: There was gravel that had to be removed where piling was going in, as well as historic piping in the ground. Because the reconfiguration project is going in on existing pads, ground penetrating radar was used in placing the pilings. In placing more than a thousand pilings using ground penetrating radar, the only thing that was hit was an abandoned brine line. Even though it was abandoned, “we still shouldn’t have hit it,” Monthei said.
Automation software has also been a challenge, requiring “a lot of detailed software development.” The software isn’t off the shelf, Monthei said, “you have to have it all customized.” There are factory acceptance tests for the software, he said, and then integrated software testing. “It gets tested and retested and tested again before we ever put it into service,” he said.
On schedule for late third quarterAlyeska is planning for startup of the reconfigured system in late third quarter, roughly the end of September.
Startup was originally projected to happen at the end of 2005.
How confident is Alyeska in its third quarter 2006 startup date?
Monthei said the company is “much further along in our design and our understanding of the work” than when the 2005 completion date was projected, and is well into the construction phase. Most materials have been received and fabrication is almost complete. “The degree of uncertainty is much less at this point than it would have been entering preliminary” engineering, he said.
Fabrication work is about 95 percent complete and about 30 percent of field construction is done. Pump modules were placed beginning in August, Heatwole said, with the work running well into December, and with just a few modules left to go out from town.
Alyeska has some 250 construction personnel and work was to resume at the pump stations in January after a three-week break over the holidays. The construction work force was to be back on the job at the end of the second week in January, with the focus on cable pulling and inside terminations.
There are hundreds to thousands of feet of cable in this project, both power cables and control cables. Most of the work this winter will be placing cable trays, putting cable put in the cable trays and making thousands of cable terminations.
Pulling the cable has required a lot of planning, Monthei said. Some cables can’t be pulled when it’s really cold, he said: “It’s a really complex piece of work that’s required a lot of planning.”
Training ongoingEach pump station has three new pumps, with three lines coming off the mainline and three lines returning. Pump stations 3 and 4 each have two turbine generator units — pump station 1 has a single generator — supplying power to variable frequency drive units that power the pumps. Pump station 9 will have commercial power from Golden Valley Electric; pump station 1 has power from Prudhoe Bay, supplemented by its one generator.
The variable frequency drive units allow the operator to regulate the current going to the motors “so that you can vary the drive output of the motor,” as opposed to the present system where the motors are either on or off. With the new system “we can regulate the amount of flow through each motor and optimize the running operation of each individual motor.”
In addition to construction at the pump stations, training is ongoing. “We have a very ambitious training program to get everybody up to speed ... with the new technology, and that’s well under way,” Monthei said. Technical training and operator qualifications are required for both maintaining and operating the new infrastructure. It’s a “huge effort,” he said. Alyeska has set up hundreds of classes and is running the technicians that will be operating or maintaining the system through those classes.
Functional checkout planning under wayPlanning began for functional checkout of the new system about a year ago, Monthei said, with commissioning and startup engineers working with functional checkout crews. For every system there will be a detailed procedure on how to do a functional checkout with loop checks to make sure that the signal from the device being controlled is received at the control station, part of a whole series of tests to make sure a circuit not only works, but is getting accurate signals for whatever it is measuring.
“And we’ll do that for every single device on the whole project,” he said, a process that will take months to complete.
By the time startup occurs, everything will be checked out and documented.
And documentation will be done electronically, using technology BP developed for its Atlantis platform.
Alyeska sent a group down to look at how BP did functional checkouts. An engineer working on the Atlantis checkout had designed a system to collect data electronically “as opposed to what we used to do with drawings and file folders.” Unfortunately, Monthei said, he came up with it too late for BP to implement it for Atlantis, but Alyeska invited him to implement the new system for pipeline strategic reconfiguration.
“It’s all electronic.” It is updated with as-built information electronically. “Instead of redlining it and waiting for the draftsman to come back and collect the redlines and redo the drawings and reissue them, it’s immediately, real-time corrected and goes into the database,” he said. “There are no redlines.”
Minimizing cost, extending economic lifeThe objectives of pipeline reconfiguration are to “minimize the cost of transportation of oil and to extend the economic life of TAPS,” Monthei said. And with “modular and scalable components” the company can “accommodate the throughput variations,” adding modules at the pump stations if needed in the future.
The project will also modernize and simplify facilities and infrastructure, and automate the pipeline system.
The reconfiguration includes installation of four new pump stations at pump stations 1, 3, 4 and 9, and upgrades to pump station 5, which is a relief station. Pump station 12 has gone offline, he said, and pump station 7 will go offline soon after the reconfiguration is complete. “So we’ll be operating essentially with four brand new pump stations.” Pump station 5 will be upgraded in two phases: controls critical to the strategic reconfiguration are being upgraded now and will be completed this year; life cycle replacement work at pump station 5 will be done in 2007.
Life cycle replacement and control system upgrades, as well as security upgrades, are also being done. The current system is reliable because there are redundancies built into it, Monthei said. The new technology is more reliable, and “much more efficient both cost-wise and maintenance-wise as a result of that increased reliability.”
Most of the existing system is 1960s and 1970s technology. Think in terms of your car, he said: new cars don’t even go in for maintenance until they have 100,000 miles on them. Automotive technology “has really made a big step change and it has in this industry, too. The turbines are much more efficient and they just don’t require a lot of maintenance.”
In addition to maintenance costs, Heatwole noted, for some of Alyeska’s present equipment there may be only a single vendor. Monthei said that it is getting much more difficult to get replacement parts, particularly in the controls.
The new equipment, in addition to requiring less frequent maintenance, is, like modern automobiles, “much more efficient in terms of fuel usage.” Two locations, pump stations 1 and 9, will use commercial power, Monthei said, “providing some efficiencies and also reducing the likelihood of any kind of spill because we just simply have less equipment out there to run and the stuff that is running is new stuff.”