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Oil Patch Insider: Exxon executives talk low flow, Turndown capacity and drilling
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“Yes, we’re concerned,” Exxon Mobil Corp. CEO Rex Tillerson said during a quarterly earnings call March 4, when an analyst asked whether he was worried about the impact of declining oil production on the mechanical integrity of the trans-Alaska oil pipeline.
In the short term, declining oil production is an economic problem. In the long term, it’s a mechanical problem. And mechanical problems inevitably become economic problems.
As throughput declines, oil moves more slowly through the pipeline. The slower the oil moves, the cooler it gets. The cooler the oil gets, the more likely its water component will freeze and various waxes and sediments will separate, both of which can create clogs.
Fixing those clogs could require shutting down the pipeline, which would require shutting down North Slope oil production, which would shut down revenues to the state.
Not a new issue The problem has been around for a while, as ExxonMobil Senior Vice President Jack Williams noted when Tillerson asked him to elaborate on the problems with “low flow.”
“You know I was up in Alaska 10 or 12 years ago and we were talking about it then,” Williams said. “So we’ve been working this, how can we get that turndown capacity lower?”
In 2007, Alyeska Pipeline Service Co., which operates the pipeline on behalf of Exxon and the other owners, commissioned a study of the consequences of low throughput. The study found many unexpected shortcomings. For instance, the existing corrosion and leak detection systems might need to be upgraded to work in those low flow conditions.
“A lot of people have asked me, at what point will the declining flow of crude oil become a problem for TAPS, for Alyeska,” Alyeska Pipeline President Tom Barrett told state lawmakers in March 2011, after a winter shutdown. “And the response is simple - the problem exists out there now. This is not something facing us down the road; it’s not theoretical; it’s an issue we confront at TAPS daily, today. And without increased throughput in the line, our challenges of operating the line safely will increase over time.”
Williams framed the problem in terms of “turndown capacity,” which is the ratio of maximum and minimum capacity for some device. Throughput on the pipeline peaked at 2.136 million barrels per day in 1988. The minimum throughput is an open question.
“As flow rates decline below 350,000 bpd, issues related to low flow will increase the problematic impact on the TAPS operation,” Alyeska concluded in a 2011 report on low-flow issues. “Measures to mitigate these issues utilizing the existing 48-inch pipe at throughputs below 350,000 bpd have not been determined at the date of this report.”
By getting that minimum capacity figure lower, the pipeline could operate for a longer time, which would allow the North Slope to be a profitable endeavor for a longer time.
Increasing production cheaper Any efforts to allow the pipeline to run at lower throughput would require upgrades.
Another cheaper solution is to increase oil production. Williams noted the increased drilling activities at the BP-operated Prudhoe Bay unit, where the company is a major working interest owner. ConocoPhillips Alaska has also been increasing drilling at the Kuparuk River unit.
With Arctic National Wildlife Refuge production increasingly unlikely and National Petroleum Reserve-Alaska production waiting for higher prices, the solution may have to come from another hydrocarbon, Williams suggested. “You know, if you had a large gas development that could be supportive in terms of continued activity to get more liquids flowing down that line,” he said. “So we are doing a lot of things, but ultimately you know it is a concern. Not the next three-four years, but it’s a concern I think moving out.”
- Eric Lidji
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