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State of the pipeline address: five year strategic plan Alyeska aims to be leaner and meaner, will reduce paperwork, workforce and footprint to lower costs Steve Sutherlin PNA Managing Editor
Alyeska Pipeline Service Co. is 15 months into executing a far-reaching strategic plan that will take up to five years to complete, Dave Wight, Alyeska president and CEO, told the Alaska Support Industry Alliance morning meeting March 28 in Anchorage.
On the regulatory side the company is starting a “three to five year journey to completely rebuild the structure of the company,” he said.
Wight said the company would start at ground zero on each on of the important aspects of operations.
“We started out as a construction company and we had two manuals that told us how to run the entire company. Now we have 400,” he said.
Wight said that employees were enthusiastic about the plan because it will make doing their jobs much easier.
“Our focus and our belief is that when we finish, the regulators will be able to look at us and understand us and actually their presence will be less necessary in the future than it is today,” Wight said. Huge footprint “We have a huge footprint, and by that I mean we’re 800 miles long,” he said, adding that the line was designed to carry 2 million barrels per day but is carrying half that now.
Wight said that the company could save more than a million dollars a year by removing shut-in pump stations. If North Slope production subsequently increased or if ANWR came on line, the pipeline could accommodate one and one-half million barrels per day without those surplus pump stations in place.
“We believe that those particular pump stations are not the appropriate pieces of equipment if we were to be so fortunate as to have a challenge to where we needed to get back to 2 million barrels per day,” he said.
Alyeska is examining the possibility of closing unneeded loading berths at the Valdez terminal, as well as reductions in the amount of storage tanks.
But Wight said the plan wasn’t just about removal. In fact the company is undertaking a 90-day study to identify opportunities to reinvest in the pipeline. Alyeska is considering potential storage at different locations that would change the way the line is operated, and reinvestment in pump stations that would modernize, reduce the footprint and reduce operating expenses of the facilities. For example, the drivers at the pump stations are 30-year-old aviation technology built before waste heat recovery was available, while in other areas oil-fired boilers are used to keep equipment warm. Foundations must be refrigerated to avoid melting permafrost, so reducing size has a savings in energy efficiency. Workforce duplication Wight said the company would examine the size and complexity of its workforce, and look at duplication. The company has human resources and accounting functions in each of its three offices in Anchorage, Fairbanks and Valdez. It has engineering functions in two locations, but it doesn’t have engineers located with contractors to facilitate the planning and development process. The company will keep three offices, but many functions will be consolidated.
“You’ll see us with a smaller group at the top of the house, a flatter organization, more direct reports, and fewer people and fewer contractors,” Wight said.
The margins of the pipeline, and indeed those of the energy industry in Alaska are on the margins of competitiveness, and in order to attract new capital expenses must be reduced, Wight said. The company is attempting to shave from 30 cents per barrel to 50 cents per barrel from current transportation costs, as its own contribution to creating a cost-competitive environment in the state that will encourage investment.
Wight said the state also benefits when Alyeska improves its profitability. For every dollar Alyeska shaves off transportation costs, the state gets 20 cents to 25 cents in revenue improvements and savings as a shipper in the line.
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