The operator of the trans-Alaska pipeline announced Friday that it’s cutting oil flow by 10% to manage a forecast for high inventory at its Valdez tank farm, a decision that puts in place a 50,000 barrel-per-day cut to critical North Slope production.
The move began at noon Friday, said Michelle Egan, a spokeswoman with Alyeska Pipeline Service Co.
“We are starting a proration today,” Egan said. “It is due to a high inventory toward the end of May that we are trying to manage.”
The world is oversupplied with oil after the collapse in demand due to the coronavirus crisis and an oil price war between Saudi Arabia and Russia.
The action is temporary, and similar steps been taken in the past, Egan said. About 502,000 barrels of North Slope oil flowed through the pipeline on Thursday.
Asked if job cuts will follow the production cut, Egan said, “This is not a jobs situation. This is a temporary action to manage something that will happen in the latter part of May.”
Sean Clifton, policy and program specialist with the state Division of Oil and Gas, said last summer there was a larger cut to production due to maintenance across the North Slope.
“Wells get turned on and off all the time,” he said, for various reasons.
But he said the current cut is unusual because of what’s driving it: the lack of global demand.
“We haven’t had such a sharp drop in demand for a long time, if ever,” he said. “So this is kind of a unique problem.”
The cut could last a month or two and be spread across all fields, he said.
But averaged out over a year’s time, it should not represent a large drop to the state’s annual production.
“It’s not like we’re cutting 10% for the rest of the year,” Clifton said. “It will be a variable, day-to-day thing and they’ll carefully monitor (oil) throughput, operations at the field, and tanker loading.”
“It’s a balancing act with a lot of variables,” he said.
He said the state will be crunching numbers to determine the impact to the treasury.
A collapse in oil prices recently prompted the state to decrease its long-term revenue projections.
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