Tuesday, November 5, 2013

Tesoro takes over; Refiner seeks right of way for new $50 million oil pipeline across Cook Inlet

Wesley Loy
For Petroleum News

Construction of a new subsea pipeline to carry crude oil across Alaska’s Cook Inlet now appears imminent.

Tesoro, which operates a refinery at Nikiski on the inlet’s east side, has assumed control of the project. The concept had originated with Cook Inlet Energy LLC, a westside oil and gas producer.

On Oct. 23, the newly incorporated Trans-Foreland Pipeline Co. LLC submitted an amended pipeline right-of-way lease application to the Alaska Department of Natural Resources. State records show the company has an address in San Antonio, Texas, where Tesoro is based.

Tesoro Alaska Co. is shown as the 100 percent owner of Trans-Foreland Pipeline Co. Three company managers are listed: Charles S. Parrish, G. Scott Spendlove and Gregory J. Goff.

The application package indicates a great deal of planning work has gone into the proposed $50 million pipeline. Project construction is scheduled to start in February and run through October.

Need for pipeline

Oil production peaked in Cook Inlet long ago, and the Tesoro refinery has been in operation since 1969.

It might seem curious, then, why a bold new pipeline is planned now.

Project backers cite a number of compelling reasons. First, the pipeline could eliminate risky tanker runs across the icy, turbulent inlet. Second, the line could provide westside oil producers a reliable alternative to the Drift River terminal where tankers load. Flooding from eruptions of the nearby Redoubt volcano in 2009 knocked the terminal out of service, hampering oil production for months.

A third benefit from the pipeline is potentially lower oil transportation costs.

The proposed pipeline, 8 inches in diameter, will have a design life of 30 years and a capacity of 62,600 barrels per day, the right-of-way application says.

The sponsors believe the project “will need to attract shipping commitments of approximately 4,000 bbls per day to make the tariff competitive with the existing CIPL system,” the application says. “However, given the increased operational reliability and environmental benefits offered by this line the project may be viable at lower throughput levels.”

CIPL is Cook Inlet Pipe Line Co., the Hilcorp subsidiary that operates Drift River terminal and related pipelines.

U-shaped route

It was Cook Inlet Energy that, in November 2012, filed the initial application to DNR for a right of way for the Trans-Foreland Pipeline. Cook Inlet Energy sells its oil to Tesoro.

The project takes its name from the fact that the pipeline will run between the West Foreland and East Foreland points on either side of the inlet.

The pipeline will begin at Cook Inlet Energy’s Kustatan production facility, which processes oil from the company’s offshore Osprey platform. The line will end at the tank farm at the Tesoro refinery.

The pipeline won’t run straight across the inlet. Rather, it will loop south and then north, coming ashore below Nikiski. From there the line will run, buried, along the Kenai Spur Highway to the Tesoro tank farm.

Laying the pipeline in a U-shaped configuration will make construction easier.

“The forelands represent the narrowest part of Cook Inlet and have high currents and a deep trench,” says a project description prepared by Michael Baker Jr. Inc.

The selected route will “minimize tidal stresses on the pipeline and avoid water depths greater than 200 feet, the maximum depth for safe operation by marine divers,” the project description says, adding the pipeline route doesn’t cross any seismic faults.

The underwater segment of the pipeline will run about 22 miles. Counting the onshore bits on either side, the line will run a total of 29 miles.

130 construction jobs

The right-of-way application estimates the cost of materials at $15 million, and the cost of construction at $35 million.

The estimated annual cost to operate and maintain the line is $5.2 million.

The project is expected to generate 130 construction jobs. A dozen people, eight in the field and four in the office, will be needed to operate and maintain the pipeline, the application says.

Two contractors are being considered for pipeline installation: Price Gregory and CONAM Construction, and NANA Construction.

A lay barge will install the subsea pipe, the application says. Most of the in-water construction work is scheduled for May and June, prior to the commercial salmon season. This is also a timeframe when annual tidal velocities are lowest, and beluga whales are out of the area.

The pipeline will rest anchored on the seafloor, and will be buried where conditions allow subsea trenching.

The pipeline will have a number of safety features including a leak detection system. It’ll accommodate smart pigs, devices that slide through a pipeline to test for problems such as corrosion. An epoxy coating on the pipeline, plus cathodic protection, will provide further defense against corrosion. The pipeline wall will be half an inch thick.

Most of the pipeline route crosses state lands. DNR’s State Pipeline Coordinator’s Office has set a Dec. 31 deadline for submitting written objections to the requested pipeline right-of-way lease.

Read more: http://www.petroleumnews.com/pntruncate/303162471.shtml