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Vol. 18, No. 17 Week of April 28, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

A calamity averted

Pump station upgrades said to prevent long Alaska pipeline shutdown in 2011

Wesley Loy

For Petroleum News

The operator of the trans-Alaska oil pipeline has been working for years to modernize pump stations along the 800-mile route.

The chief objective of this “strategic reconfiguration” program is to save costs.

But it has yielded other important benefits, says operator Alyeska Pipeline Service Co.

After an oil leak forced a pipeline stoppage in January 2011, new pump station equipment helped avert a shutdown of unprecedented length, a top Alyeska manager said.

The problem facing Alyeska was the rapid chilling of idle oil inside the pipeline. New pumps and power units installed as part of strategic reconfiguration were able to restart the flow, something the old “legacy equipment” probably couldn’t have done, said John Baldridge, Alyeska’s senior director of pipeline operations.

“At best, we probably would not have achieved restart until ... summer, meaning North Slope production would have been shut down for months, and the pipeline and its associated equipment likely would have sustained significant damage,” Baldridge said.

Such a long shutdown of Alaska’s most important physical asset would have been a financial calamity for the state.

Behind schedule, over budget

Baldridge’s remarks, signed June 14, 2011, are among extensive filings in a huge tariff battle now pending before the Federal Energy Regulatory Commission and the Regulatory Commission of Alaska.

The issue is to what extent the pipeline owners may recoup their strategic reconfiguration costs from rate payers. Two companies that ship oil on the line, Anadarko and Tesoro, argue the project was poorly conceived and has been plagued by mismanagement and massive cost overruns.

The state likewise is arguing a substantial portion of strategic reconfiguration costs should be disallowed from carrier rate bases. Higher oil transportation costs have the effect of reducing state royalty and production tax revenue, and state lawyers told legislators in February that hundreds of millions of dollars are at stake in the tariff litigation.

Regulatory filings show that strategic reconfiguration is years behind schedule, and far over the original budget.

The pipeline owners sanctioned, or approved, the project in early 2004 at $242 million.

Work to modernize three of the pipeline’s main pump stations has been completed. These are stations 3, 4 and 9. Work continues on Pump Station 1 and, according to the state, isn’t expected to wrap up until the end of 2014.

The owners and the state agree that strategic reconfiguration costs have exceeded $700 million so far.

The 2011 drama

Alyeska is an Anchorage-based consortium that runs the pipeline on behalf of owners BP, ConocoPhillips, ExxonMobil and Chevron.

While Alyeska acknowledges strategic reconfiguration has experienced some bumps, managers say the new pumps, turbine generators, electric motors and other upgrades are working as designed and are proving to be wise and needed investments. The program is allowing Alyeska to automate its pump stations, save maintenance costs and reduce the risks associated with the line’s aging original equipment, they say.

The new equipment really showed its value in early 2011, said Baldridge, who started at Alyeska in 1977, the year the pipeline began operations.

On Jan. 8, 2011, an oil leak at Pump Station 1 forced a three-day pipeline shutdown as Alyeska looked for the source of the leak.

A shutdown in the frigid Interior Alaska winter is a big problem for Alyeska, bigger than it used to be. Because of declining production from North Slope fields, the pipeline is moving much less oil than it once did, and the oil takes longer to reach the Valdez tanker terminal. If the warm oil stops moving, it can chill rapidly, inviting very serious problems.

Thus, the January 2011 shutdown was extremely worrisome.

“We were concerned that by stopping pipeline flow to contain the leak, the cold weather would preclude us from restarting the pipeline until the summer because wax would have built up, water would have separated from the crude oil, and ice would have built up in the pipeline at low areas and on the mainline valves,” Baldridge said.

During the shutdown, he said, the oil temperature dropped at several locations to a point where slush and ice likely were forming in the pipeline.

Meantime, North Slope oil field operations, limited to only 8 percent of normal production, faced “even greater jeopardy” with the potential for wells and gathering and transit lines to freeze and fail, Baldridge said.

Federal and state regulators fully supported Alyeska’s scramble to fix the Pump Station 1 leak and restart the pipeline, he said.

Crucial to the restart was the ability of the newly reconfigured pump stations to recirculate oil. That is, to move oil through the pump stations multiple times. This adds frictional heat to the crude.

After the restart, the pipeline would be shut down for another 58 hours to finish the leak repairs. This led to oil in the pipeline cooling even further, to “dangerously low levels,” Baldridge said.

Alyeska again used the new pumps and recirculation lines at stations 3, 4 and 9 to heat oil. After the pipeline restarted, it took more than three weeks to clear the line of cold oil and achieve normal operations, he said.

Baldridge said he was “convinced that the legacy equipment would not have been able to generate enough heat to restart the pipeline in the winter after the 2011 repair shutdown.”

Lawyers for the state, however, are skeptical. They argue much of Alyeska’s strategic reconfiguration was unnecessary and “imprudent.”

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