President's Message
Kevin Hostler, President and CEO

2006 Year in Review

As we look back on 2006, I am proud of our achievements and am now focused on the year ahead. As a company, we were faced with many challenges. Weather conditions in Southcentral created massive flood conditions, threatening the integrity of the system on the line and at the terminal. Employees and contractors responded with speed and expertise to keep TAPS intact. When faced with the Prudhoe Bay shutdown and the Congressional hearings that followed, we focused on ongoing daily operations ensuring that TAPS was operating safely, efficiently and reliably. These challenges were met with energy and resourcefulness.

Throughout the year, we’ve also continually assessed the Strategic Reconfiguration (SR) implementation plan and the impact that it has on our workforce. Undoubtedly the most unfortunate event of all was a fatality with one of our contractors in Valdez.

Alyeska’s top priority has always been and will continue to be moving oil safely and reliably. This is the cornerstone of our Integrity Management Program. We have a comprehensive, systematic and documented approach to integrity management and as I have learned more about our workforce capabilities and accomplishments, I have become increasingly confident with our approach. These efforts will contribute to our goal of exceeding production goals and environmental standards.

SR not only represents the most significant project of 2006 and 2007 but the most significant investment since the construction of TAPS began more than thirty years ago. After altering plans and schedules to support resource and staff issues, Pump Station 9 (PS 9) is scheduled to go online in early 2007 followed by PS 3 shortly after.

Once operational performance is proven to be satisfactory, the system will run exclusively on the new SR systems and will then be integrated into operations. At that time, resources will shift to PS 4 and PS 1 to complete the SR process.

SR will improve Alyeska’s cost structure and help improve the economics of the North Slope exploration, development and production. This strategic and historic investment in the pipeline is an investment in Alaska’s oil industry that will pay dividends for years to come.

Another major effort is underway in Valdez to upgrade our ballast water treatment plant. It is oversized for what we need to run our terminal into the future. We plan on nearly $30 million in project work for 2007 and we will talk about this project throughout the year.

I stand with the Alyeska employees in their dedication to excellence—and to Alaska. Because of this, I am confident that our approach to modifying our operations will continue to keep the safety of our people, system integrity and the environment as our top priorities.