Friday, March 6, 2015

A Chill Wind from the North, Redux

TAPS Low Flow Study, Slide 5

Back in 2011, I wrote a blog post entitled A Chill Wind from the North. It discussed the ability of the Alyeska Pipeline to continue to transport oil from the North Slope of Alaska to Prince William Sound as throughput dropped in the pipeline. This is occurring as the North Slope continues its inexorable decline down the depletion path. The post was based on a study which indicated the pipeline would need to keep the flow at 300,000 barrels of crude per day in order to maintain operation. In order to operate below that threshold, the study authors suggested that significant mitigation steps would need to be taken.

Last week on a flight to DFW, I sat next to a young Alaskan man who happens to be in Engineering Management. We got to talking and this topic came up in conversation. He indicated this continues to be a topic of study and attention up in Alaska. I decided to take that as a sign I should revisit the issue and see what things look like four years later.

In the original post, I ended with a rather dire assessment that output could make a step-change drop once the pipeline reached a failure point and that the assumption we'd continue to see a gradual decline in output might be flawed.

A more gradual decline was argued as more probable by various environmental groups interested in keeping ANWAR rig-free as well as evaluations commissioned by the Alaskan Department of Revenue. The scenarios are not mutually exclusive as the gradual decline scenario (where pipeline failure would occur closer to 100,000 bbl/day) assumes significant investment in the infrastructure.

The Story in 2015

Here is a snapshot of the average daily throughput for the Alyeska Pipeline through 2014.

Data from TAPS Pipeline Operations
The actual performance has been reasonably in line with the TAPS assumption of 6% depletion. The pigs have been modified to increase the efficiency of keeping the wax buildup down and heat is being added to the system after modifications to the active pump stations and the re-commissioning of a previously closed pump station.

Some of the investment in the infrastructure required to keep crude flowing in the pipeline below 300,000 barrels per day is being put in place. What remains to be seen is will there be enough money available to keep investing should oil prices stay low due to a prolonged downturn in the economy.

Thoughts

This brief note is meant to keep you thinking about infrastructure. There is so much infrastructure in the U.S. and the other Western nations which was built out in a heyday of cheap energy and booming economies. This infrastructure plays a huge role in how and/or if we can continue to power our financialized economy and continue our existing methods of resource extraction indefinitely and when societies will be forced to make very hard choices on how to deploy scarce resources.

Whether the Alyeska pipeline can continue to operate theoretically for decades to come, remember that this continued operation, like so much else in the modern energy extraction business, requires far more inputs in terms of money and equipment to maintain a declining and poorer quality flow of hydrocarbons.


No comments: