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Vol. 21, No. 13 Week of March 27, 2016
Providing coverage of Alaska and northern Canada's oil and gas industry

TAPS needs more throughput

Alyeska’s Barrett: Federal regulatory environment discourages increased oil flow

ALAN BAILEY

Petroleum News

Faced with ever more difficult issues relating to ice formation and wax precipitation, the trans-Alaska oil pipeline needs more oil production from the North Slope to stave off declining oil throughput, Tom Barrett, president of Alyeska Pipeline Service Co, told a meeting of the Resource Development Council on March 17. Alyeska operates the pipeline on behalf of the oil companies that own the line.

“We live and breathe on (oil) throughput,” Barrett said. “The lower the throughput, the harder our job is and the more challenging it is.”

Essentially, as oil throughput declines and slows, the oil becomes colder on its way down the line, resulting in increased wax precipitation from the oil and the possibility of ice formation.

Using current approaches to dealing with the ice and wax issues, the pipeline can safely operate down to 300,000 barrels per day - Alyeska does not currently have a solution for dealing with flow rates below that level, Barrett said. In 2015 the pipeline handled on average just over 500,000 barrels per day.

Barrett commented that the regulatory climate, particularly on the federal side, is challenging in Alaska, with regulation tending to impede badly needed oil development. And the oil industry in the state needs a stable fiscal environment he said, commenting that Great Britain has recently reduced its tax rates for offshore oil and gas production, to help the industry through the current period of low oil prices.

Barrett made comparison between federal regulation in Alaska and government regulation in Norway. A senior Norwegian government official recently commented that the government of Norway supports offshore oil development, because of the economic benefits that the development brings, he said. And, while the Norwegian regulatory regime is based on a partnership culture between government and industry, the command-and-control approach to regulation in the United States is highly prescriptive. In Norway, the government sets performance standards and then works with industry to figure out how to meet those standards, Barrett said.

Moreover, the United States has moved in a direction of tending to criminalize mistakes rather than seeking solutions, Barrett commented. If an engineer makes a mistake, for example, the government wants to lock him up as part of the command and control approach to industry oversight.

“Don’t breathe unless you get a permission slip and, by the way, if you make a mistake you’re going to jail,” Barrett said when characterizing his view of the U.S. government attitude.

But that is not how to conduct business, he said, commenting that taking pride in work and having regulators and industry working together is a more effective approach.

A need for trust

The industry also needs to ensure that it can be trusted, by working in a safe and reliable manner, Barrett said. He commented on Alyeska’s safety record.

“Last year we had the safest year we ever had on TAPS,” Barrett said. “We don’t want anyone going home hurt. That’s our mantra.”

TAPS pipeline reliability in 2015 stood at 99.5 percent, with two scheduled shutdowns for the carrying out of essential maintenance work being the reason for the reliability level coming in fractionally below perfect. In fact, Alyeska has now completed a four-year testing program on all 176 of the pipeline’s mainline valves, an exercise involving the tricky operation of conducting valve tests without stopping the flow of oil through the line, Barrett said.

Responsibility and transparency

Increasingly, the public now expects corporate social responsibility and transparency. And, to be successful, a business needs the trust of its customers, of the public and of the regulators, Barrett said. In March Alyeska was named by the Ethisphere Institute, for the fifth year in a row, as one of the world’s most ethical companies. The company received a large operator environmental performance award from the American Petroleum Institute. The Alaska SeaLife Center gave the company its 2015 Alaska Ocean Leadership Award for the company’s fishing vessel spill response fleet program in Prince William Sound. The company has also received the governor’s safety award.

And Alyeska employees perform many activities in support of local communities, Barrett said.

When it comes to environmental stewardship, Alyeska had a successful year in 2015, despite some significant flooding issues along the Dalton Highway during the spring breakup, and despite have to live with wildfires in the Interior during the summer. Both Alyeska and the Alaska Department of Transportation have been working pro-actively to build gravel and snow berms, to more effectively handle any flooding that may happen this year, Barrett said.

Addressing low flow

Meanwhile, Alyeska continues to conduct testing and take action to deal with the growing challenge of low oil flow in the pipeline. The company has now staged contingency supplies of methanol at certain points along the line, to act as antifreeze in the oil in the event of a winter pipeline shutdown. However, given the problems that the methanol would create for the refineries that process the oil, the staging of methanol does not provide a simple solution, Barrett said.

Alyeska runs scraper pigs, torpedo shaped devices that fit inside the line, to clean deposited wax off the pipeline interior. The company is evaluating a new European technology that sweeps precipitated wax by circulating fluid at high pressure. However, this technology has yet to be used in a 48-inch pipeline, similar to the TAPS main line, Barrett said

For some time Alyeska has been adding heat to the oil in the pipeline, in particular by recirculating the oil at some of the pump stations. The company has installed a point source heating system at one of the remote gate valves and is planning to install another of these systems at pump station eight, Barrett said. Rather than simply siting the heating systems at pump stations, the company has found it to be more effective to heat the oil at points along the line where the oil becomes especially cold during the winter, Barrett said.

Looking to the future, as the company’s legacy workforce ages, the company is actively bringing in new people, many of whom have TAPS experience through work for Alyeska’s contractors, Barrett said. The company has about 800 employees and uses hundreds of contractors. About 95 percent of the workforce is Alaska based, and 70 percent of the company’s contractors are headquartered in Alaska, Barrett said. About 20 percent of the company employees are Alaska Native, 30 percent are women and 33 percent are minorities, he said.



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Dropping of Crowley a matter of business

The fact that Crowley Maritime Corp. is no longer in the running for the next contract for maritime support services at the Valdez Marine Terminal results from a new competitive bidding procedure for the services, Tom Barrett, president of Alyeska Pipeline Service Co., told a meeting of the Resource Development Council on March 17. Alyeska operates the terminal on behalf of the terminal owners.

“It’s business, basically,” Barrett said.

Crowley has provided the support services, including tanker escort tugs, docking tugs and spill response support vessels, for the past two 10-year service contract cycles.

For the next contract cycle, Alyeska started the contract bidding three years in advance of the expiry date for the current contract, Barrett explained. The idea was to make the bidding more competitive by giving the company that is awarded the contract time to build any equipment they might need to provide the contracted services, he said. The company might need, for example, a different set of escort tugs. Barrett confirmed that, although the new contract has not yet been settled, Crowley is no longer in the bidding.

—ALAN BAILEY