Sometime over the weekend the 18 billionth barrel of North Slope crude oil moved to Valdez through the Trans Alaska Pipeline System.
It’s a milestone because it means that the pipeline has delivered about twice the amount of oil originally forecast decades ago to be produced from the slope.
In 1969 the Prudhoe Bay oilfield, the anchor for the big oil pipeline, was thought to hold 9.6 billion barrels of oil that could be produced. Alaskans expected the oil fields to be depleted by 1999, and the pipeline to be shut down.
Oil industry veterans were confident more oil found, though. As of September, Prudhoe Bay has actually produced 13.6 billion barrels with the remaining seven billion barrels – a total of 18 billion – coming from fields discovered and developed in the years after 1977, when Prudhoe started up.
Adm. Tom Barrett, president of Alyeska Pipeline Service Co., the TAPS operator, gave a head’s up about the 18th billionth barrel in a briefing on the pipeline given to the Resource Development Council in Anchorage last Wednesday.
Barrett also lauded the 99.9 percent “reliability” record Alyeska’s employee have achieved for the pipeline two years in a row, and – knock on wood – possibly a third year at the end of this month if no mishap occurs.
The reliability percentage means the time the pipeline was doing its job, and with 0.1 percent “downtime.” The 0.1 percent is mainly the time TAPS was deliberately taken out of service for periodic maintenance.
There is a lot of oil left on the North Slope and explorers are finding more, so the pipeline has a lot of its life ahead. Producing companies plan to spend about $24 billion over the next 10 years to develop about 10 new oil deposits found in recent years.
If all of those projects go forward enough new oil will be produced to keep the pipeline operating at its current rate at about 500,000 barrels per day through 2029. With luck there could be a small increase in production, too.
That’s still about one fourth of the 2 million barrels per day-plus that TAPS moved from 1980 until 1988, when a long, gradual decline in oil production began mainly in the big Prudhoe field.
Alyeska Pipeline has had to make changes to adapt the pipeline to a lower oil “throughput.” The system was designed to handle 2 million barrels a day, which meant that as the volume of oil dropped TAPS’ costs had to be spread over fewer barrels. Gradually, the cost-per-barrel increased, which had the effect of reducing the value of the oil on the North Slope.
That cut into royalties and taxes paid to the state of Alaska and profits to the producing companies.
To compensate, Alyeska took steps make TAPS more efficient at lower volumes. Pump stations that were no longer necessary were closed and then pump stations that still operated were refitted with new, more modern pumps and other machinery.
Not only would TAPS operate more efficiently at lower volumes but the new equipment was designed to be able to “ramp up” if a lot more oil was found, such as from the Arctic National Wildlife Refuge, so the throughput would increase. For now, however, it appears the half-million-barrel-a-day volume will be maintained for the near future.
Even the current rate has presented challenges, however. For example, at lower volumes the oil moves more slowly through the pipe, which means there is less friction on the liquid against the metal wall of the pipe.
Friction helps keep the oil warm but with less heat being generated the oil was cooler in the pipe, which made it vulnerable if there were a midwinter shutdown in cold weather that is common along the pipeline route, particularly through Alaska’s Interior.
At lower volumes water entrained in the oil also “dropped out” and if there were a shutdown it could accumulate at low points and even freeze. Wax also dropped out of the oil and tended to accumulate along the inner pipe walls. That can be removed but it adds cost.
TAPS had a near-miss a few years ago when a small oil leak at Pump Station One, on the North Slope, caused a shutdown that lasted for several days. Alyeska’s operators were concerned that the oil might would chill into a jell, so that they might not be able to restart it. That could last until spring. Luckily, the pipeline was restarted.
During the shutdown, however, Alyeska’s operators conceived an innovative plan to warm the oil during the winter to reduce the threat of the system freezing up if there were a shutdown. It couldn’t be implemented at the time but it was a strategy that Alyeska was to implement in following winters, as insurance.
It involved recirculating the oil in pumps at pump stations to create friction and more heat. Oil was put back into the pipeline at higher temperatures than it came out of the pipe into the pumps. Another strategy developed involved heating diesel and injecting it at certain points, which added heat to the total liquids that were moving.
All of these problems would be exacerbated if the flow of oil were to drop further, say to 400,000 barrels per day or even 350,000 barrels per day, because there would be even less oil moving more slowly and even less friction to provide heat.
The question is often asked at what point TAPS could become uneconomic to operate. It’s difficult to answer that because economics plays a key part in the decision. Mechanically the pipeline could operate at much lower volumes but the transportation cost per barrel would rise significantly to the point that the entire business, even operation of the North Slope oil fields, could become uneconomic.
Alyeska has said in the past that it could probably operate TAPS in its current configuration down to about 300,000 barrels per day. It could, in theory, operate at rates below that, but the system would have to be reconfigured. TAPS could, for example, operate in a “batch” mode, with oil stored on the slope and then moved in batches as the pipeline is restarted and then shut down.
Those costs would still be high, however, and it’s not known if such a solution would work. Adm. Barrett, Alyeska’s CEO, said the best solution is to keep finding more new oil to keep the oil volumes stable or, with luck, even increasing the flow.
For now, these prospects appear favorable. But things could change. An unexpected, long-term decline in oil prices could dampen current pace of exploration on the slope. A significant increase in state taxes on oil production, such as proposed in a pending citizen ballot proposition, could do the same thing.