Providing coverage of Alaska and northern Canada's oil and gas industry
October 2018

Vol. 23, No.43 Week of October 28, 2018

Hilcorp has put new Cook Inlet subsea pipelines into operation

Alan Bailey

Petroleum News

Hilcorp Alaska’s new oil and gas transportation arrangements, enabling the movement of oil by pipeline west to east under Cook Inlet, have gone into operation. The new pipeline arrangements come as a result of what Hilcorp calls its cross-inlet pipeline project, a project that has also involved extending the Tyonek subsea gas pipeline. According to Regulatory Commission of Alaska filings, gas transportation services on the modified Tyonek gas line began on Oct. 3, thus enabling the shipment of gas across the inlet through that line. Another filing said that oil transportation services under the inlet on the oil line began on Oct. 16.

Initial oil actually began to flow east to west, using the new pipeline arrangements, on Oct. 18, Hilcorp has told Petroleum News. The conversion was completed without incident and is currently operating as planned - once full flow rate has been reached, a daily average of 14,000 barrels of oil will flow through the system to the Nikiski oil refinery on the Kenai Peninsula, Hilcorp said.

Hilcorp also said that it successfully laid a new subsea oil pipeline from the Tyonek offshore gas production platform to the west side of the inlet. The company said that it will complete the subsea connection to that pipeline in 2019. The company has laid this pipeline in support of potential future oil development from the Tyonek platform - it was cost effective to lay this line in conjunction with laying the gas line.

It appears that Hilcorp has accomplished the pipeline project within its target of completing the project by the end of this year. This despite a delay in the delivery of steel piping because of the impact of Hurricane Harvey last fall.

Eliminate the Drift River terminal

The prime objective of the project has been to eliminate the need for the Drift River oil terminal on the west side of the inlet. Crude oil from fields on the west side of the inlet has for many years been shipped by tanker from Drift River to Nikiski. There have been safety concerns associated with the terminal because of the terminal’s proximity to Redoubt Volcano.

Following the pipeline project, Hilcorp engineering and environmental teams are still working on the plan to decommission the Drift River terminal, with formal preparations for the decommissioning scheduled to begin in the first quarter of 2019, Hilcorp said.

Converted CIGGS line

The project has involved the conversion of one of the twin subsea Cook Inlet Gas Gathering System, or CIGGS, gas pipelines to the carriage of oil. That, among other things, has involved the construction of a relatively short length of new onshore oil pipeline on west side of the inlet, to connect the CIGGS line to the northern end of the existing Cook Inlet pipeline that had been carrying oil from the oil fields to the Drift River terminal. Pumping arrangements on the Cook Inlet pipeline had to be modified to switch the flow of oil to the north towards the CIGGS line, rather than south towards Drift River.

On the east side of Cook Inlet, where the CIGGS lines come onshore on the Kenai Peninsula, the converted CIGGS line has been connected to the Nikiski refinery via another new, short section of onshore oil pipeline and another converted gas line.

Maintaining gas carriage capacity

The twin CIGGS pipelines have been shipping natural gas across the Cook Inlet in support of gas and electricity utilities. This function is particularly vital in winter, when gas demand is very high and some of that gas has to be shipped from a gas storage facility near the city of Kenai. And, so, to replace the gas transportation capacity lost through the conversion of one of the CIGGS lines to the carriage of oil, Hilcorp has extended the existing Tyonek gas line that runs from the Kenai Peninsula to the offshore Tyonek gas production pipeline: The extension has involved laying a new subsea gas pipeline from the platform to Ladd Landing on the west side of the inlet. Hilcorp has also replaced part of the onshore section of the Tyonek line on the Kenai Peninsula.

Business arrangements

The business and regulatory arrangements for the new pipeline configuration reflect the fact that the primary purpose of the pipeline project is to improve the shipment of oil from the west side of the inlet. Thus, the cost of the project is being carried by Cook Inlet Pipeline, the oil carrier and not by Kenai Beluga Pipeline, the gas carrier that operates CIGGS - the changes in the pipeline system will not impact the rates charged for the transmission of gas across the inlet.

Consequently, CIPL has acquired the existing Tyonek pipeline and made the modifications and extension to that pipeline system. That has required CIPL to obtain a certificate for the carriage of gas in addition to its traditional business of carrying oil.

KBPL is retaining ownership and operation of both of the twin CIGGS pipelines. But, because one of these lines now carries oil, KBPL has had to obtain an RCA certificate for the carriage of oil, in addition to its certificate for the carriage of gas.

Various other regulatory approvals were also required, including the approval of the recovery by CIPL of project costs from oil shipment rates, and approval of an agreement between CIPL and KBPL for the carriage of oil on the CIGGS line, and for the carriage of gas on the Tyonek line.

“A lot of hard work paired with a cooperative effort from everyone involved, including state and federal agencies, helped us execute the project efficiently and without any major delays,” Hilcorp said. “Support from the community, including the Cook Inlet Citizens Advisory Council, also helped us to achieve the conversion in a timely manner”


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