A safer arrangement

Hilcorp plans to ship crude oil across Cook Inlet by pipeline rather than tanker

Alan Bailey

Petroleum News

Hilcorp Alaska is planning to transport crude oil direct to the Tesoro oil refinery on the Kenai Peninsula by pipeline from oil fields on the west side of the inlet, David Wilkins, Hilcorp Alaska senior vice president, told a meeting of the Resource Development Council on May 4. The idea is to eliminate the use of the Drift River terminal on the west side of the inlet, the oil terminal that is currently used to load tankers for the shipment of oil to the refinery. For a number of years the Drift River terminal has been a cause of concern because of its proximity to the Redoubt volcano. In 2009 an eruption of the volcano forced an evacuation of the terminal and an emergency drawdown of oil stored at the terminal site. Wilkins said that the proposed pipeline arrangement would meet both the oil and the gas needs of the inlet. He commented that Hilcorp’s new pipeline proposal demonstrates his company’s long-term commitment to the Cook Inlet. “We see much more development in the Cook Inlet. Many more drill wells. And we see decades worth of production in the Cook Inlet and we’re going to re-invest in the Cook Inlet,” Wilkins said.

Convert a CIGGS line

The $75 million pipeline project would involve converting one of the twin pipelines of the existing Cook Inlet Gas Gathering System to the carriage of oil and building a new relatively short subsea gas pipeline across the northern part of the inlet from the Tyonek platform to Ladd Landing, north of the village of Tyonek. An existing gas pipeline that connects the platform to Nikiski on the Kenai Peninsula would then enable the transmission of gas all the way across the northern part of the inlet, into the existing Beluga gas transmission pipeline on the west side of the inlet. The planned oil pipeline arrangements will require the construction of two new, short pipeline segments, one to connect the northern end of the existing Cook Inlet Pipeline on the west side of the inlet to the northern end of the CIGGS line that is earmarked for oil transportation, and one to connect the southern end of the CIGGS line at East Foreland to the line that feeds oil to the Tesoro oil refinery, Richard Novcaski, Alaska operations manager for Harvest Alaska, Hilcorp Energy’s Alaska pipeline subsidiary, has told Petroleum News. To bring the new arrangements into operation, potentially in the fall of 2018, the direction of flow through the Cook Inlet Pipeline will need to be reversed, switching from southward flow to northward flow, Novcaski said. Once the new flow regime is in operation, Hilcorp plans to decommission the Drift River terminal and the section of the Cook Inlet Pipeline that connects to the terminal. Decommissioning will involve removing all hydrocarbons from the facilities, Novcaski said. The pipeline plan comes as part of Hilcorp’s program of investment in Cook Inlet, upgrading the infrastructure and making the infrastructure more efficient, Novcaski said. After evaluating several possibilities for improving the transportation of Cook Inlet oil, Hilcorp’s recent acquisition from ConocoPhillips of the Tyonek platform has provided the opportunity to pursue the pipeline configuration that Hilcorp now plans. And the new oil pipeline arrangements will reduce oil transportation costs, Novcaski said. Hilcorp spokeswoman Lori Nelson told Petroleum News that, following upgrades to the Drift River Terminal after Hilcorp entered the Cook Inlet oil industry a few years ago, the company had committed to the Cook Inlet Regional Citizens Advisory Council to, within five years, start evaluating other options for transporting oil across the inlet. The new pipeline proposal follows up on that commitment, Nelson said.

A safe proposal

A recent gas leak from a subsea fuel gas line associated with the Middle Ground Shoal oil field on the east side of the inlet has raised concerns about the condition of the subsea pipelines in the inlet. But the CIGGS lines under the inlet were built in the mid-1980s, more recently than the older Cook Inlet infrastructure, Novcaski said. Moreover, Hilcorp has been able to regularly check the condition of the CIGGS lines using instrumented pigs that travel inside the lines. With a good history of stability, the pipelines are known to be in excellent condition, Novcaski said. And the lines, being gas lines, were designed to withstand higher pressures than are involved in the transportation of oil. The lines are not impacted by abrasion issues on the seafloor, as was the case with the leaking gas line, Novcaski said. Moreover, Hilcorp has recently upgraded to a new state-of-the-art leak detection system for its Cook Inlet oil pipelines, he said. Novcaski also pointed out that using an existing pipeline, rather than building a new oil pipeline, eliminates uncertainty associated with subsea stability for a new line. And the use of a pipeline for shipping oil across the inlet will eliminate the risks associated with carrying the oil by tanker in waters with strong tidal currents and that are impacted by sea ice in the winter. Tankers from Drift River offload oil at the Nikiski dock, near to where the Tesoro refinery is located. Splitting the existing subsea gas transmission under the Inlet into two pipelines several miles apart can also improve the reliability of the transmission system, Novcaski said. Moreover, bringing the pipeline from the Tyonek platform under regulation could bring new opportunities for gas development in the northwestern Kenai Peninsula, he commented.

Gas transportation capacity

The east to west transportation of gas under Cook Inlet has become vital to Southcentral gas and power utilities, especially in the winter. The transmission of gas through the Tyonek pipeline and the new pipeline to Ladd Landing will, in effect, replace the transmission of gas through the CIGGS line that will be switched to oil transportation, thus enabling the east-west gas transportation capacity to be maintained. And, with the compressors used to push gas east to west through the pipeline system being upstream of the junction on the Kenai Peninsula between the Tyonek line and the Kenai Beluga Pipeline system that includes the CIGGS lines, Hilcorp anticipates being able to continue to maintain the required maximum gas transportation rates across the inlet, Novcaski said. Existing arrangements enabling gas flow in either direction under the inlet, not just east to west, will also be maintained, he said. However, the changes to the pipeline configurations and usage will require approval by the Regulatory Commission of Alaska. Hilcorp will ask the commission to approve a gas capacity exchange between the converted CIGGS line and the new pipeline arrangement via the Tyonek platform, Novcaski said.

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