Changes at terminal will be incremental

Alyeska will focus on conversion of saltwater firewater system, evaluation of optimum number of storage tanks at Valdez

Kristen Nelson

Petroleum News Editor-in-Chief

Alyeska Pipeline Service Co. is implementing its strategic reconfiguration plan for the trans-Alaska pipeline and is continuing to evaluate “how we will approach the future of our business” at the terminal, says company spokesman Mike Heatwole.

But changes at the terminal will be “incremental” as opposed to the major changes on the pipeline, he told Petroleum News in a July 13 e-mail.

Changes that had been on the top of the evaluation list for Valdez — power generation, management of tanker vapors and the possibility of installing internal floating roofs for the storage tanks — “will continue to be evaluated but will not move forward at this time,” he said.

Alyeska will move a proposal to replace a saltwater firewater system with freshwater to the next level of study, Heatwole said, and is “going to evaluate the optimum number of crude oil storage tanks” and “continue discussions and plans for a facilities and organizational consolidation.” A planned move of the operations control center to Anchorage remains on track for 2006, he said, and the company will also evaluate the ballast water treatment system as the tanker fleet moves to vessels with segregated ballast.

Inventory has become an issue

The Alaska Department of Revenue’s Tax Division said in its June production summary that there was “concern about high inventories, June 7-10, as Valdez holding tanks topped 5.5 million barrels.”

The federal-state Joint Pipeline Office studied inventory capacity last year as part of an evaluation of proposed strategic reconfiguration at the terminal.

Joe Hughes, supervisor at the JPO’s Valdez field station, said in a July 2004 report that when Alyeska started looking at terminal reconfiguration, it predicted that at rates of 900,000 barrels per day of oil the tanker fleet “is probably over-sized and there will be little inventory at the VMT tank farm.” Inventory levels appeared to confirm that, he said, reaching a low of 4.3 percent in March of 2004.

But in June of 2004 the inventory levels “dramatically changed,” going from an average of 10 percent to 20 percent of 17 tanks in service, to 69 percent of 16 tanks in service on June 1, 2004, and to 76 percent of 15 tanks in service June 17, 2004, and continuing into July 2004 with 75 percent of 15 tanks in service, Hughes said.

He said Alyeska attributed the 2004 increases in inventory to work being done at the terminal and to ships being in dry dock or diverted to carrying crude in other areas.

Tanks absorb imbalance

Asked about the inventory levels this June, Hughes told Petroleum News July 8 that just 14 tanks were operational this winter out of 18. The owners have also had “some difficulties in turning ships around” due to mechanical issues, he said.

The “creep” upward in inventory had started when he wrote the report last year, he said, and while a pipeline shutdown for maintenance this June sucked the inventory down, it has been slowly creeping up again, and is “over 50 percent again.”

Alyeska’s Heatwole told Petroleum News in an e-mail that while he couldn’t comment directly on issues around any specific inventory level, “we appropriately manage the inventory levels at the terminal as part of how we run the business.

“Inventory can be very fluid as it moves around due to a variety of factors — including weather conditions (especially wind and wave activity), ice in the tanker lanes, tanker transit schedules, and pipeline throughput to name a few,” he said.

Heatwole said Alyeska currently has 14 tanks in service, compared to 18 tanks in service at the height of production (2.1 million bpd) in the late 1980s.