Wednesday, December 12, 2012

Crossing Cook Inlet; Anchorage-based oil producer seeks ROW for $50 million subsea pipeline

Wesley Loy
For Petroleum News

A small independent is seeking a state right of way for a new subsea oil pipeline across Alaska’s Cook Inlet.

Such a pipeline could reduce or eliminate the current risky practice of shipping crude oil by tank vessel from the west side of the turbulent, icy inlet to the Tesoro refinery at Nikiski on the Kenai Peninsula.

Cook Inlet Energy LLC on Nov. 26 applied to the Alaska Department of Natural Resources for a right-of-way lease for the proposed Trans-Foreland Pipeline.

The 29-mile line will start at Cook Inlet Energy’s Kustatan oil production facility, near West Foreland point, and cross beneath the inlet to the tank farm at the Tesoro refinery, which is near East Foreland point.

The pipeline will loop south to avoid deep trenches and strong tidal currents prevalent in the strait between the Forelands.

The $50 million pipeline is slated to commence operations in August 2014, say documents submitted to DNR.

Risky oil shipments

Anchorage-based Cook Inlet Energy is a subsidiary of Tennessee-based, publicly traded Miller Energy Resources Inc.

Cook Inlet Energy has an assortment of oil and gas assets on the west side of the inlet, including the West McArthur River oil field and the offshore Redoubt unit and Osprey platform. Oil from Osprey is piped ashore to the Kustatan production facility.

Cook Inlet Energy is aiming to rapidly increase its production, and a number of other companies also are producing or exploring on the west side, including Hilcorp and Apache.

Presently, west side crude flows via pipelines to the Hilcorp-operated Drift River terminal, where tankers or barges pick up the oil for delivery across the inlet to the Tesoro refinery.

Water transport of crude oil is inherently hazardous, and the inlet’s big tides and dangerous winter ice floes add an extra measure of risk.

Cook Inlet Energy says the subsea pipeline could eliminate the need to move oil by tanker or barge, and could reduce oil transportation costs.

The company also notes the close proximity of Redoubt volcano to the Drift River terminal. Eruptions in 2009 closed the terminal and idled west inlet oil production for months.

The company further says the Trans-Foreland Pipeline is needed to “bypass the aging infrastructure on the west side of Cook Inlet.”

Large-capacity line

The new pipeline, 8 inches in diameter, will have a capacity to move 90,000 barrels per day of sales-grade crude, Cook Inlet Energy’s right-of-way application says. That’s a very large number relative to current oil production from the west side.

Cook Inlet Energy says it believes it will need to attract shipping commitments of about 4,000 barrels per day to make the tariff competitive with the Cook Inlet Pipe Line system. CIPL is the Hilcorp subsidiary that operates the Drift River terminal.

“However, given the increased operational reliability and environmental benefits offered by this (Trans-Foreland) line, the project may be viable at lower throughput levels,” the right-of-way application says.

A project description offers considerable detail on the pipeline route. The pipeline will start at the Kustatan facility and run 2.2 miles, buried in uplands, to the bluff on the west side of the inlet.

At the top of the bluff, the pipe will be installed using horizontal directional drilling for 2,640 feet into Cook Inlet, where it will exit onto the seafloor.

The line then will run about 26 miles across the bottom.

“The pipeline is laid in a horseshoe shape to facilitate construction in the high tidal currents occurring between the East and West Forelands,” a project description says. “The forelands represent the narrowest part of Cook Inlet and have the highest currents and deepest trenches. The route was also selected to minimize tidal stresses and avoid water depths greater than 200 feet, the maximum depth for safe operation by marine divers.”

On the east side, the buried pipeline will run 1.6 miles along Hedberg Drive and the Kenai Spur Highway to its terminus at the Kenai Pipe Line Co. tank farm near the Tesoro refinery. KPL is a subsidiary of San Antonio, Texas-based Tesoro.

Construction schedule

The pipeline will be equipped with a leak detection system and a cathodic protection system to prevent corrosion. And the design will accommodate internal inspection devices known as pigs, the application says.

A lay barge, tugs and other support vessels will be used to install the pipeline on the Cook Inlet seafloor.

Cook Inlet Energy says 130 construction jobs will be filled for the project. About eight field workers and four office workers will be needed to operate and maintain the pipeline.

Construction is scheduled for April through August 2014. The work schedule will be designed to avoid conflicts with commercial salmon fishing.

Cook Inlet Energy says two contractors are under consideration for the pipeline installation: Price Gregory and CONAM Construction, and NANA Construction.

Most of the pipeline route, including the long stretch under Cook Inlet, is on state land. Thus, Cook Inlet Energy is seeking a DNR lease for the right of way.

The application materials are posted online at