And in the latest twist in this effort to reduce the pipeline's costs while maintaining its safety and integrity, Alyeska has identified $101 million in cost savings for 2010 as a result of revisions to its long-range plan, said Michelle Egan, Alyeska corporate communications director.
Some of the cost savings will come from cutting 60 positions next year. Roughly half of the them will be those of Alyeska staff, with the other half consisting of contractor positions, Egan said.
Not all of those position reductions involve people losing jobs -- half of the targeted Alyeska positions are currently vacant. And, sometimes, if a position has been vacant for a while, people are able to devise workarounds, Egan said.
"We've asked people in each department and division to look at efficiencies, look at open positions," Egan said.
Pump station 1
As part of its review of its long-range plan, Alyeska is delaying a major upgrade of pump station 1, where the pipeline starts on the North Slope, with the upgrade now slated for completion in 2013 rather than 2012 as previously planned, said Mike Joynor, Alyeska vice president for pipeline oil movements and engineering.
The pump station 1 upgrade is part of Alyeska's strategic re-configuration program, a program that forms a major part of the company's response to declining oil throughput. Strategic re-configuration involves the modifying the pump stations to use electric pumps rather than the original turbine-powered pumps, and upgrading the control systems to use modern communications and computer technology, with centralized operational control and monitoring of the pipeline now conducted from Anchorage.
Electrification of the pipeline pumping systems enables the pipeline operations to respond flexibly to varying pipeline throughputs, while upgrade of the control systems is enabling major de-manning of the pump stations.
In fact, the newly announced job cuts form part of a general trend toward reduced staffing levels, enabled in part by the effects of strategic re-configuration, Joynor emphasized. Alyeska had staffed up in 2005 and 2006 to conduct major re-configuration work, and the results of that work are starting to kick in, he said.
One at a time
As part of the re-configuration program, Alyeska has been electrifying the pump stations one at a time, using the experience gained from the modification of each pump station to refine the plan for upgrading the next one. The new electrical pumps went into operation at pump station 9 in February 2007, with pump station 3 starting its electric pumps in December of that year, and pump station 4 following suit this year.
Alyeska had planned to start the electrification of pump station 1, the only operational pump station remaining to be converted, next year, with the new systems coming on line in early 2012.
Located at the intake end of the pipeline, with connections to feeder lines from the North Slope oil fields, and having metering systems and crude oil storage tanks, this pump station is significantly more complex than the others, Joynor said.
And, with the re-configuration plan for pump station 1 having been developed in 2005, prior to the experience of converting any of the pump stations, Alyeska has decided to completely re-evaluate its plans for pump station 1, even though that re-evaluation will delay the start of work on the pump station until 2011.
"What we've done is backed up and done a complete evaluation of the engineering packages and things of that nature," Joynor said.
Low-flow study
Factoring into the decision to delay the pump station 1 work is the desire to see the results of a current study into the impact on the pipeline system of low oil flow rates, before finalizing the pump station 1 plans, he said.
The low-flow study, started in August 2008 and scheduled for completion next year, is investigating how the declining speed at which oil will flow down the pipeline in the future will impact factors such as oil temperatures, wax deposition and the possible dropping out of water and sediment inside the line, factors possibly requiring revised oil quality standards and the installation of new ancillary pipeline equipment.
The deferral of the pump station 1 re-configuration, coupled with some new efficiency gains identified in other projects in Alyeska's long-range plan, will result in Alyeska's capital budget for 2010 dropping by $46 million, compared with the capital budget for 2009, Joynor said.
And the 2010 job cuts, with some revenue savings resulting from the deferral of project work, will result in a revenue budget reduction of $55 million in 2010, relative to 2009, said Egan.
Taken together, the cuts in the capital and revenue budgets add up to that overall anticipated cost reduction of $101 million, a cost reduction that must be viewed in the context of a pipeline throughput decline from a peak of 2.1 million barrels per day in 1988 to around 700,000 barrels per day at present.
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