President's Message
Kevin Hostler, President and CEO

Alyeska responds to Prudhoe Bay Shutdown

When BP announced its decision to shutdown the Prudhoe Bay oil field because of corrosion found in the transit lines on the North Slope, Alyeska immediately began working to assess the impact to pipeline operations. The first focus area was to begin managing the immediate response and long-term issues, including potential impacts of a prolonged shutdown through winter. At the same time, we began having conversations with the Joint Pipeline Office, state and federal agencies, the media, and other stakeholders concerning these operations and future plans.

The initial announcement projected the impact of the shutdown to reduce the daily production of North Slope oil by 400,000 barrels a day—nearly half the normal daily output. As I am writing this, the latest projections are that the western operating area of Prudhoe Bay will remain open and that transit line will continue to deliver production to Pump Station 1. Thus, while we have , developed an operating plan that is adjusted to managing the reduced throughput down to 400,000 barrels per day, we are focused on current projections around 600,000 barrels per day. The long-term effects of this reduction in throughput are not immediately known, but one of the drivers behind Alyeska’s modernization project, known as Strategic Reconfiguration, was to create a scalable source of pumping power that could accommodate the reduction of oil flowing through the pipeline. While we continue to assess the best way to move forward, we are equally focused on ongoing daily operations and making sure TAPS operates safely, efficiently and reliably.

Preventing corrosion through our pigging program is a key part of the TAPS integrity management plan. Routine pigging cleans the pipeline of wax and other deposits every 7 to 14 days and our "smart pigs” deliver data on wall thickness, alerting engineers to any abnormalities that may have developed in the pipe. We have run 60 smart pigs through the line since start up almost 30 years ago. Smart pigs are run every three years. While our next run was scheduled for 2007, I asked my team to move this into 2006 with a request for an expedited review of the data we receive.

During the past several weeks there have been several misleading reports surrounding the corrosion and what is being done to fix the problem, including one that said the Trans Alaska Pipeline System had been shutdown. The pipeline has not shutdown and staff has not stopped working. Alyeska employees are dedicated 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.