Pipeline built to survive extremes can’t bear slow oil flow

Here at the top of the world, January brought a glimpse of the anxious future facing Alaska’s once-mighty oil pipeline.

The 800-mile Trans Alaska Pipeline System was built for extreme conditions. But as the state’s oil production has declined, the pipeline faces a new challenge: flows so sluggish operators worry the line may become unusable, cutting off access for hundreds of North Slope oil wells.

With the mercury dipping as low as -60 Fahrenheit, workers in January fired up heating units across the system. It worked, but if the brutal cold had lasted or the oil flow had slowed further, the pipeline would have been in uncharted territory. Four decades after it opened, Alaska’s pipeline — once a symbol of independence for an oil-strapped nation — is facing a midlife crisis. The line now moves a quarter of the volume it carried at its peak. And as the flows slow, the risks are rising.

“We’re already at the stress point,” said Tom Barrett, president of the Alyeska Pipeline Service Co., which operates the system. “We don’t have the kind of cushion you’d like to have.”

While new discoveries in Alaska have raised hopes recently, the state’s oil production has been falling for years. Most of the easy crude has been sucked out of Prudhoe Bay, the mammoth field on Alaska’s North Slope. And the availability of cheap shale in the lower 48 states means there’s less incentive for explorers to open new fields farther north, where drilling can be three times more expensive.

The result: Alaska’s output was 565,000 barrels a day last month, down from a peak of more than 2 million in 1988, according to state data.

Lower volumes mean crude travels more slowly through the pipeline, losing heat along the way. And at low temperatures, crude behaves badly. Ice crystals form that can damage pumping equipment. Carbon molecules, meanwhile, coalesce into paraffin, a waxy residue that, if not cleared out, can gunk up the line “like a big, frozen tube of ChapStick,” said Betsy Haines, Alyeska’s oil-movements director.

Recent discoveries by Caelus Energy LLC and Repsol SA have raised hopes of opening up new, multibillion-barrel fields. Conoco, Exxon and BP, meanwhile, are doing all they can to squeeze more oil out of existing wells. The Big Three have borrowed techniques from shale frackers in the Lower 48, injecting torrents of natural gas and seawater underground to force up more oil.

But those efforts merely halted production declines, they didn’t reverse them. It may take years before the new finds ship significant quantities of oil — and then only if they prove economic in a world where prices have been locked in at around $50 a barrel.

West Texas Intermediate crude has traded in a range near that level since late last year. The U.S. benchmark was down 0.3 percent at $52.93 a barrel as of 9:54 a.m. London time on Tuesday.

“It’s all really a function of the oil price,” said Scott Digert, BP’s head of reservoir management in Alaska. “How long can you continue to operate an increasingly marginal field?”

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