ANOTHER PIPELINE EMERGES IN ARGUELLO WRANGLE

The complex wrangle over long delayed efforts to begin oil flow from Point Arguello field off California has been further complicated just weeks ahead of planned start-up. Six members of the Point Arguello producers group have begun permitting for a 3/4 mile pipeline bypass to move the field's crude directly to the All American Pipeline (AAPL) from the Gaviota onshore oil/gas processing complex.

May 20, 1991

4 min read

The complex wrangle over long delayed efforts to begin oil flow from Point Arguello field off California has been further complicated just weeks ahead of planned start-up.

Six members of the Point Arguello producers group have begun permitting for a 3/4 mile pipeline bypass to move the field's crude directly to the All American Pipeline (AAPL) from the Gaviota onshore oil/gas processing complex.

In doing so, the group-led by Union Pacific Resources Co.-would avoid a $1.20/bbl tariff at the Gaviota interim marine terminal (GIMT). The tariff on the proposed 18 in., 100,000 b/d Mariposa Pipeline Co. (MPC) would be only 6/bbl, sponsors estimate.

MPC officials denied press reports the move represented a split that might break up the Point Arguello group or that it weakened support for interim tankering of Arguello crude.

"Avoiding a $1.20/bbl tariff gives us an economic incentive to proceed with this project," an official with one of the MPC companies said. "We haven't given up on tankering.

"We still support it. We're just not willing to pay the tariff if we don't have to."

Meantime, a Chevron official noted expiration of a May 13 deadline for filing a lawsuit against Santa Barbara County over the county's denial of an interim tankering permit for the project. The California Coastal Commission upheld that denial.

The Point Arguello partners deferred their decision on filing the suit to May 26 because they believe current talks with the county regarding the dispute "might prove fruitful by then."

BACKGROUND

Santa Barbara County and California state officials oppose interim tankering of Arguello crude to Los Angeles area refineries and insist all future Offshore California crude production be moved to market via onshore line.

Chevron Corp. and its Point Arguello partners have struggled for 3 years to place the $2.5 billion project on stream with production of 80,000-100,000 b/d moved via tanker to Los Angeles until a feasible pipeline alternative is available.

AAPL and other companies have proposed several pipeline alternatives. Until now, the only one of those alternatives getting official backing from the Chevron led group has been the Pacific Pipeline Co. project, a 171 mile line that extends mostly along the former Southern Pacific railroad right-of-way (OGJ, Apr. 8, p. 27).

All of the remaining 12 participants in the 18 member Point Arguello group have equity interests in GIMT. None of the Point Arguello partners participating in the Mariposa project has interests in GIMT.

The MPC group companies own 25.8% of the oil to be produced from Point Arguello, scheduled for start-up later this month and limited at first to 20,000 b/d moved by pipeline to refineries outside Los Angeles.

MPC is a general partnership that includes Union Pacific Crude Pipeline Inc., Pennzoil Exploration & Production Co. unit Tiburon Transport Co., Koch Exploration Co., Oxbow Energy Inc., Harvest Corp., and Simmons Santa Barbara Ltd.

PROJECT DETAILS

MPC's line will take 6-9 months to construct at a cost of about $4.5 million.

It will be laid on portions of the Gaviota processing plant property and along an easement previously graded for future AAPL expansion.

The buried line will be a common carrier system intended to move crude east on AAPL. The project will include a 50,000 bbl surge tank near an existing firewater storage tank and the existing AAPL pump station.

At present there is no direct route for crude transportation from the Gaviota plant to AAPL. Crude from the processing complex must be stored at GIMT whether it is shipped to AAPL or via tankers.

CHEVRON RESPONSE

A Chevron official said it isn't surprising, given frustrations over the long dispute over Point Arguello, that smaller partners would pursue another transportation alternative-especially considering the size of their Arguello investment relative to their overall investments, in comparison with bigger partners.

However, the added storage facilities called for under the Mariposa project would be redundant, he said, given the $60 million in existing oil storage and distribution facilities the partners provided at Gaviota to comply with county rules for emergency storage.

The Chevron official questioned whether the county would approve permits for redundant tankage, taking into account the required placement of existing tankage "in a way so as to reduce visual impacts."

In addition to permitting questions, the official raised the question of who might buy the crude-given that the only current shipper of crude on AAPL is AAPL parent Celeron Corp.-and whether AAPL would open that portion of its system for "such a low rate of throughput."

"We don't see any impact on the viability of the partnership," the Chevron official said. "It's an intramural dispute that's gone public ... in the mistaken notion that (this project) gives (the smaller partners) leverage."