An Anchorage-based energy company has plans to build an oil pipeline that would connect west side Cook Inlet production with east side processing facilities — a task currently accomplished through tankers making laps between the two shores.
Cook Inlet Energy’s JR Wilcox spoke Friday to the Cook Inlet Regional Citizens Advisory Committee about the company’s plans for an 8-inch, trans-Foreland pipeline that would have a maximum output of 90,000 barrels of oil per day. The project has been in the works for several years, Wilcox said, would cost about $53 million and could create 130 local jobs during construction.
“We couldn’t say at this point it is 100 percent committed, but we are very serious about it and we see ourselves moving full speed ahead,” he said. “Obviously there are things that could delay or revise the project, but we’ve been working on this a couple of years and I don’t really see any reason to slow down at this point.”
The company is currently working through the engineering, permitting and right-of-way work in hopes of having the pipeline installed by May 2014 and commissioned shortly thereafter.
The oil pipeline announcement comes on the heels of Hilcorp Alaska’s plans to reopen the Drift River terminal — a critical piece of Cook Inlet oil infrastructure. Drift River along with the Christy Lee loading platform allows oil producers to store crude oil in tanks and pump it into tankers that haul it across the inlet to the Tesoro processing facility.
Shipping oil across the inlet is risky business due to tides, currents and ice conditions. According to a recent CIRCAC study, it poses the greatest risk in Cook Inlet due to tankers’ great oil capacity and concentrated operations in the middle region of the inlet.
Wilcox said the 25-mile underwater pipeline Cook Inlet Energy hopes to build would be a much safer and cost-effective way to accommodate increasing levels of inlet oil production previously on the slide. Cook Inlet oil production peaked at just over 200,000 barrels of oil per day in the 1970s, was at about 7,000 barrels a day in 2009 but increased to about 10,000 barrels per day in 2011, according to Alaska Department of Natural Resources.
“Of course over the intervening 50 years we have seen the production decline precipitously from the west side of Cook Inlet while the in-state demand has grown,” he said. “Now instead of having a surplus, we supply a small fraction of what the Tesoro refinery uses.”
The pipeline would also provide a steady stream of oil to Tesoro and would eliminate potential interruptions caused by Drift River’s relationship with Mount Redoubt — an active volcano that erupted in 2009 causing mud lahars and a shutdown of the facility.
“If the volcano is acting up I think that we can all expect that the terminal will be shut in for an indefinite period,” Wilcox said. “If 100 percent of your production is going through that terminal, it is kind of a concern.”
Cook Inlet Energy currently ships 1,100 barrels per day from its Osprey platform in the Redoubt field and from onshore at the West McArthur River field through Drift River and the Christy Lee platform.
The pipeline would begin at Cook Inlet Energy’s Kustatan Production Facility near the West Foreland and would move in a horseshoe pattern offshore about 25 miles, coming onshore about one mile north of the Nikiski docks, Wilcox said. The curve in the path of the line allows for it to stay out of the deep Foreland channel, he added.
Wilcox said an 8-inch line works well with current levels of production and would allow for about 12 times as much oil to flow through the line on a daily basis. He said the pipeline, likely operated by a sister company, would be available for any and all production companies to use through a tariff system.
The start of the pipeline would be about eight miles from Hilcorp’s pipe infrastructure at Trading Bay, Wilcox said. Cook Inlet Energy CEO David Hall said the company has made all operators in the Inlet aware of their intentions with the pipeline, but discussions about doing business are a bit preliminary.
“But, we’re moving ahead assuming people want to jump on the bandwagon here,” Hall said.
Wilcox said the pipeline would also prolong the life of existing oil fields because the industry wouldn’t be burdened with supporting a large system like Drift River in the face of declining oil fields, if there was a continued decline of production.
“(If there was continued decline) there would still be a reason to do this because your costs are so much lower and you don’t end up putting so much burden on those marginal wells,” Wilcox said.
Brian Smith can be reached at email@example.com.