Foreign fuel for Western Alaska: economies of scale, ocean transfers save money.

Author:Bradner, Mike
Position:OIL & GAS

How do Alaskans get their fuel?

It's delivered in a surprising number of ways and from a wide variety of places.

Alaska is one of the nation's top oil and gas producing states, yet some parts of the state, mainly western Alaska, get a lot of their diesel, gasoline, and heating oil from foreign sources, overseas.

Why is that? Because it's more efficient and cheaper.

Foreign tankers loaded with fuel products station themselves at sea just outside the state's territorial boundaries (there's less paperwork) and transfer the fuel to shallow-draft "lighterage" barges (small coastal barges) for final delivery to regional terminals or fuel hubs.

From these regional hubs, shallow-draft tugs and barges move fuel to small inland communities on the river systems, where it is transferred to community tank farms. Since most small villages do not have docks, fuel barges are sometimes grounded on the beach as the delivery is made, and Alaska is the one state where the US Coast Guard allows a fuel barge operator to intentionally touch bottom on a beach.

Fuel distributors still bring products in large seagoing barges from domestic sources, such as the Tesoro Corporation refinery at Nikiski, near Kenai, but the recent trend is to source the fuel from overseas and take advantage of the large volumes that tankers can supply, fuel distributors say.

Fuel is sourced from Canada, Russia, Japan, South Korea, or China, wherever the best bargain can be struck. Major suppliers in western Alaska, like Crowley, Delta Western, and Vitus Marine, buy foreign fuel for at least part of their needs.

The main savings in the new arrangement is in eliminating the "backhaul" returns of empty fuel barges from western Alaska to the Kenai Peninsula, although some fuel is still supplied from Nikiski.

Fuel Distribution Operations

The summer fuel supply operation typically lasts four months, beginning in Bristol Bay and following the spring and summer melt of the ocean ice north to the Arctic. The fuel supply effort reaches Barrow on the Arctic Slope and Barter Island, in far northeast Alaska near the Canada border.

A big customer in Northwest Alaska is the Red Dog Mine north of Kotzebue, which purchases about 20 million gallons of fuel yearly. Nome's city-owned utility is a big customer, purchasing about 2 million gallons yearly, as is Alaska Village Electric Cooperative (AVEC), which operates small rural utilities. AVEC purchases between 5.2 million and 5.5 million gallons for its fifty-five village utilities; plus an additional 3.15 million gallons for Bethel's utility, which the cooperative now owns.

Crowley and Delta Western are also major fuel distributors in Southeast and Southcentral Alaska. Vitus Marine operates mainly in western Alaska. Crowley purchased Chevron's Kotzebue and Nome fuel terminals in 1985 to complement...

To continue reading