From: Keeping You Posted
Sent: Thursday, April 06, 2006 6:24 PM
To: DL, All TAPS Employees
Subject: KYP #06-022 - Strategic Reconfiguration Implementation Plan


This message is from Kevin Hostler, President & CEO (Alyeska Pipeline Service Co.).



Following my recent visits to the field and in conversations with the pipeline reconfiguration team, it became apparent to me that we needed to alter the current strategic reconfiguration implementation plan.


We will focus our current efforts on completing Pump Stations 3 and 9 first along with the Safety Integrity Pressure Protection System (SIPPS) and other critical systems at Stations 1 and 4 that are required for start up.  As Pump Stations 3 and 9 are completed, we will begin to shift resources to Stations 1 and 4 to complete construction at those locations.  Currently, we are planning for startup of Stations 3 and 9 in 2006 and Stations 1 and 4 in early 2007.  Pump Station 4 may be started at the end of 2006, depending on progress at Stations 3 and 9.


A variety of factors have influenced this decision - continued challenges around incomplete or late design engineering, issues with turbine generators (T/G), and resource constraints.


The late engineering design delivery challenges our ability to finish field construction and requires a significant level of field engineering work.  This has a two-fold impact to the project schedule and cost.  First, the incomplete design scope makes it difficult to accurately plan field work and complete procurement as originally planned.  Second, any design change after mobilization of field contractors results in increased costs, some of which can be significant if re-work is required.  A less aggressive schedule minimizes these risks and will help us perform the work in a manner consistent with our high quality standards and expectations on Project work delivery.


Additionally, timely resolution of the T/G issues around the corrosion we discovered earlier and the impact on our schedule remains a significant concern.


Recent planning efforts have identified that some of our internal resources are now overcommitted.  Simplifying our approach by completing two stations at a time will correct this problem by allowing us to focus resources on just two pump stations rather than four.  This also resolves bed space issues at all the pump stations.  We will also have a better opportunity to use the lessons learned from the startup at PS 9 and 3 on PS 4 and 1.


I know these changes will cause questions and require work adjustments for those of you who have deliverables tied to project milestones.  We have not made this decision lightly, but rather with considerable thought, discussion and management commitment to delivering a quality project in a safe manner.  Some Alyeska employees have departure dates tied to the milestones on the SR project.  I am aware of this and will work through the implementation plan and the impacts it has on our workforce.  More communications will be coming out soon on these topics.


I remain committed to the safe delivery and operational integrity required for a successful startup for the reconfiguration project.