Alyeska drops oil flow 25% from Oct. 3-6 to cut Valdez inventory

Kay Cashman

Petroleum News

Alyeska Pipeline Service Co. reduced flow through the trans-Alaska oil pipeline by 25% for three and a half days in early October, Alaska Revenue Commissioner Lucinda Mahoney said in a House Finance Committee hearing Oct. 2.

Mahoney said pipeline operator Alyeska was concerned about continuing low market demand, a projected buildup of inventories at West Coast refineries and was looking to reduce high inventories of crude storage at the Valdez Marine Terminal.

As of Oct. 1, there were 5.1 million barrels of crude oil in the 14 storage tanks at Valdez, where there is space for about 6.5 million barrels.

About 490,000 barrels a day were being moved through the pipeline over the last three days of September. Throughput was cut down to approximately 367,000 barrels per day from noon on Oct. 3 through Oct. 6.

In an April interview Michelle Egan, chief communications officer for Alyeska, told Petroleum News that prorations are part of the day-to-day management of the pipeline.

“We are not a storage facility,” Egan said. “We have a dynamic system. Oil comes in at the North Slope, it flows down the pipeline to Valdez, where it’s loaded onto tankers.”

What the company does on a daily basis is exchange information on tanker schedules and their capacities, as well as projected crude volumes from North Slope producers and “we balance the inventory and if we see we are getting high inventory of over 75%, we have two levers we can pull,” she said.

The first and most common lever is to work with the tankers and their schedules to see if an adjustment can be made.

The other lever is to ask the producers to “send us less oil and that’s a proration,” Egan said. It occurs after Alyeska looks at 28 day and 60 day forecasts to see if there are any high inventory points in the month ahead.

“We look at that every day,” she said. “Larger prorations for a shorter period of time are more common.”

- KAY CASHMAN