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Mostly decreases for North Slope lines Increased throughput bringing down tariffs for ConocoPhillips lines; shipping rates to increase for out of state Hilcorp lines ERIC LIDJI For Petroleum News
A majority of the North Slope pipelines are proposing decreases in shipping rates for the coming year, according to recent filings with the Regulatory Commission of Alaska. But some Hilcorp lines appear to be increasing the cost of shipping to out of state markets.
In their annual rate filings, the Kuparuk Transportation Co., Alpine Transportation Co., Milne Point Pipeline LLC, Northstar Pipeline Co. LLC and Endicott Pipeline Co. LLC all proposed declines in the rates they charge to ship oil to markets within Alaska, while the Milne Point Pipeline LLC, Northstar Pipeline Co. LLC and Endicott Pipeline Co. LLC are proposing increases (albeit at seemingly identical rates) for out of state service.
The Oliktok Pipeline Co., on the other hand, is proposing a major rate increase.
ConocoPhillips pipelines Through subsidiaries, ConocoPhillips Alaska Inc. operates the Kuparuk Pipeline and the Oliktok Pipeline, which connect the Kuparuk River unit to the Prudhoe Bay unit, and the Alpine Pipeline, which connects the Colville River unit to the Kuparuk River unit.
The Kuparuk Transportation Co. is proposing an intrastate rate of 22.8 cents per barrel to ship oil from the Kuparuk River unit to Pump Station 1 of the trans-Alaska oil pipeline (down from 31.6 cents per barrel) and 17.4 cents per barrel to ship oil from the Milne Point Pipeline Connection along the pipeline to Pump Station 1 (down from 23.5 cents per barrel). The RCA is taking comments on the proposed rate change through Dec. 22.
The Alpine Transportation Co. is proposing an intrastate rate of 72 cents per barrel to ship oil from the Colville River unit to the Kuparuk River unit (down from 94 cents per barrel). The RCA is taking comments on the proposed rate change through Dec. 21.
Both companies recently proposed identical decreases with the Federal Energy Regulatory Commission for interstate transportation service to out of state markets.
Both companies calculate shipping rates each year using approved methodologies. The companies attributed its decrease “primarily to a surplus net carryover balance largely reflecting the fact that actual operating expenses for 2015 were lower than previously estimated and projected throughput for 2016 is currently expected to be higher than previously estimated,” according to information included in state and federal filings.
The increase in throughput on the Alpine Pipeline is largely connected with the startup of the CD-5 project at the Colville River unit in late October 2015. While not mentioned in the filings, throughput on the Kuparuk Pipeline benefitted from the startup of Drill Site 2S in October 2015 and could be partly responsible for the proposed rate decrease.
The Oliktok Pipeline Co., on the other hand, is asking to charge $17.15 per thousand cubic feet to ship natural gas from the Prudhoe Bay unit to the Kuparuk River unit (up from $3.12 per mcf) and $12.99 per thousand cubic feet to ship natural gas from the Prudhoe Bay unit to the Milne Point Pipeline Connection (up from $2.37 per mcf).
A similar rate increase proposed for the pipeline last year led shipper BP Exploration Alaska Inc. to challenge the rates. The challenge was partly in response to questions about throughput estimates on the line, which had recently converted to shipping exclusively natural gas after years of shipping both natural gas and natural gas liquids.
Hilcorp pipelines
Through various subsidiaries, Hilcorp Alaska LLC operates the Milne Point Pipeline, which connects to the Kuparuk River unit; and the Northstar Pipeline and Endicott Pipeline, which both connect to Pump Station 1 on the trans-Alaska oil pipeline.
Milne Point Pipeline is proposing an intrastate rate of 63 cents per barrel to ship oil from the Milne Point unit to the Kuparuk River unit (down from $1.11 per barrel). The revision appears to be largely administrative because the pipeline made no revenue last year and expects none this year from intrastate shipments, suggesting that Hilcorp is currently using the pipeline exclusively for shipping oil to out of state markets. The company proposed an identical 2017 rate with FERC for interstate transportation service.
According to the FERC filing, total annual throughput on the pipeline decreased from 2010 through 2012 but increased in 2013 and 2014 before declining in 2015. Former Milne Point unit operator BP Exploration (Alaska) Inc. and current operator Hilcorp Alaska LLC both increased drilling and workover activities at the unit in recent years.
Northstar Pipeline Co. is proposing an intrastate rate of $1.14 per barrel to ship oil from Seal Island at the Northstar unit to Pump Station 1 (down from $3.90 per barrel). As with the Milne Point Pipeline, Hilcorp reported no revenue from intrastate shipments on the Northstar Pipeline in 2016 and forecast none for 2017, suggesting that the line is used exclusively for interstate shipments. The company also proposed a $1.14 per barrel rate with FERC for 2017, but presented the rate as an increase rather than a decrease.
According to the FERC filing, total annual throughput on the pipeline decreased from 2010 through 2012 but increased in 2013 and 2014 before declining in 2015.
Endicott Pipeline Co. is proposing an intrastate rate of $3.27 per barrel to ship oil from the Endicott field to Pump Station 1 (down from $4.86 per barrel) and $2.08 per barrel to ship oil from its Badami connection to Pump Station 1 (down from $3.09 per barrel). As with the other two pipelines, Hilcorp reported no revenue from intrastate shipments in 2016 and forecast none for 2017, suggesting that the line is used exclusively for interstate shipments. The company proposed identical rates with FERC for 2017 but presented them as an increase. The Endicott Pipeline has had decreased throughput in recent years.
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