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Putting natural gas spur line in context Report for Alaska Natural Gas Development Authority identifies 16 energy alternatives for Southcentral Alaska gas shortage Alan Bailey Petroleum News
A Colorado-based team has completed a study into energy alternatives for Alaska’s Cook Inlet region. Commissioned by the Alaska Natural Gas Development Authority, the study shows how options such as Angda’s proposed gas spur line from Glennallen to Palmer compare with each other in tackling projected gas shortages in the region.
Harold Heinze, Angda CEO, explained at the March 13 Angda board meeting that Angda had hired an out-of-state team that could take an independent view of the Cook Inlet situation. Angda also wanted a relatively non-technical study that most people would understand.
“The reason we hired them was to come up with a product that could be publicly portrayed to a fairly wide audience,” Heinze said. 16 alternatives Team leader Carolyn Dunmire told the Angda board that in addressing a projected shortfall of gas supplies relative to gas demand the study had identified 16 energy alternatives for Southcentral Alaska. Some alternatives could increase gas supplies, while others would reduce demand. The study only considered alternatives that might be implemented in the next five to 10 years — that eliminated consideration of potential mega-projects such as a Susitna River hydro scheme.
“It’s so large and unlikely to get through all of the political and environmental and funding hurdles,” Dunmire said.
The alternatives identified for increasing gas production consist of increasing production from Cook Inlet gas fields; building a spur gas line from a main North Slope gas export line; building a “bullet” gas line direct from the North Slope to the Cook Inlet; building an enriched gas line that would deliver natural gas and liquefied petroleum gas direct from the North Slope to Cook Inlet; importing LNG from outside Alaska; developing other Alaska gas basins such as the Nenana, Copper River and Bristol Bay basins; and implementing coal gasification, as has been proposed for Agrium’s Nikiski fertilizer plant.
The alternatives for reducing gas demand consist of the increased use of coal-fired electricity generation; the increased use of hydropower; the use of wind power; the use of nuclear power; the use of tidal power; natural gas conservation; electricity conservation; and the use of technologies such as fuel cells to distribute electrical generation to the points of use and allow the harnessing of co-generated heat.
The team evaluated the energy alternatives against each of eight criteria. By doing a separate evaluation against each criterion the team could show different ways of viewing the relative strengths and weaknesses of the different options.
“This is one way that you can consider the alternatives from different perspectives … different things are important to different people and stakeholders,” Dunmire said.
And the team chose evaluation criteria that it thought would cover the gamut of people’s concerns relating to energy supplies. Energy service The first evaluation criterion, termed “energy service,” considered the total amount of energy that a particular alternative could provide.
Using that criterion, alternatives that involve the direct delivery of increased volumes of natural gas and other petroleum products become clear winners. An enriched gas line direct from the North Slope comes in at the top of the pack, with a capability of delivering annually 360 billion cubic feet of natural gas and 16.5 million barrels of LPG. A bullet line, delivering just natural gas from the slope, comes a close second. A spur gas line with an estimated delivery of 145 billion to 220 billion cubic feet per year falls a little lower on the scale.
Other natural gas options, such as increased Cook Inlet production, the production of coalbed methane or the development of gas from other Alaska basins could produce significant volumes of gas but fall short of the delivery capabilities of a pipeline connection to the North Slope. Imported LNG and coal gasification could also produce significant amounts of energy.
Within the next few years, alternative energy sources such as coal power, wind power and hydropower are only capable of supplying much smaller amounts of energy, according to the study. Prerequisites for success The next criterion, termed “prerequisites for success,” considered hurdles to the success of each energy alternative. An alternative that can be implemented easily scores high under this criterion; an alternative involving an obstacle course of potential obstructions scores low.
Gas conservation, electricity conservation and increased Cook Inlet production come out on top under this criterion.
“Things like gas conservation and increased gas production are actually happening now because of the higher gas rates that are being seen,” Dunmire said.
Options such as wind power and coal power score quite high because they have been successfully demonstrated in Alaska. However, these alternatives would require the construction of new infrastructure.
The bullet line and enriched gas line from the North Slope fall in the middle of the pack, because the viability of pipeline construction would require an estimated increase in industrial natural gas demand to 500 million cubic feet per day in the Cook Inlet region (based on data in a 2004 U.S. Department of Energy report, Petroleum News has calculated that the combined capacity of the current industrial plants in the region is about 350 million cubic feet per day).
The spur line option scores fairly low because of its dependence on a North Slope export gas line. Start-up date The next criterion was start-up date. How quickly would the energy source come on line and start providing energy service?
Gas conservation and increased gas production have already started to happen and, so score highly under this criterion. Electricity conservation also comes out near the top. The implementation of various gas line proposals could not happen until more than six years in the future. Options such as hydropower, coal power and nuclear power seem even more distant because of the long lead times involved in developing the necessary plant and infrastructure. Investment The study team next considered the capital investments required for implementation: An alternative requiring relatively low capital investment scores high, while an alternative requiring major capital investment scores low.
Using this criterion, a group of alternatives involving small-scale power generation facilities floats to the top. These alternatives consist of hydropower, tidal power and distributed electricity generation.
Energy conservation and the import of LNG would also require relatively low capital investment.
Alternatives involving the construction of pipelines score low under this criterion, although a spur line would be considerably cheaper than a direct pipeline from the North Slope (the study cites estimated costs of $3 billion to $4 billion for a direct line, compared with $300 million to $900 million for a spur line, depending on the route of the main North Slope gas line).
Increased Cook Inlet gas production and gas production from other basins also score low, presumably because of high exploration and development costs. Monthly utility bill Development and production costs ultimately translate into bills from energy utilities to energy consumers. How much might each of the energy alternatives impact a consumer’s monthly utility bills?
Gas and electricity conservation would actually reduce these bills; all other options would ultimately result in bill increases, the study concluded.
Relatively low-cost energy production systems such as coal power, wind power and hydropower would only trigger a fairly modest increase in utility charges. On the other hand, rates for gas delivered through a spur line would depend on Lower 48 natural gas prices. The price impact of a direct line from the North Slope would depend on the extent to which industrial gas usage could support the economics of the line.
The study team saw increased gas production from Cook Inlet or production from other gas basins as having quite a high negative impact on utility bills, because of the need for high gas prices to encourage exploration for new gas reserves.
Imported LNG came in on the bottom of the list under this criterion, because of operating costs and the dependency on world LNG prices. Impact on Alaska citizens Energy options would have other impacts on Alaska citizens. These impacts include levels of employment; permanent fund dividend levels; the levels of state revenues; and the use of internal Alaska energy resources and technologies.
Looked at from this point of view the various options for increasing Alaska gas production, including the North Slope pipeline options, looked good, because they all involve significant Alaska employment and increased state revenues. Energy conservation ranks fairly low. Power generation options such as wind power, tidal power and nuclear power rank very low because they involve imported technologies.
Imported LNG falls to the bottom of the list because of a presumed large negative impact on the state’s economy. Uncertainty The study team then considered the uncertainties associated with the various energy alternatives. Alternatives with a clear route forward score high on this criterion, while alternatives clouded with uncertainty score low.
Looked at from this perspective, gas and electricity conservation come out as clear winners. Alternative energy sources such as hydropower, coal power and wind power, that involve technology proven to work in Alaska, also score fairly high.
Gas pipeline options fall in the middle of the pack because of uncertainties regarding costs and construction timeframes.
“Things like the spur line are fairly uncertain, depending on the costs … and the main line has to go in,” Dunmire said.
Nuclear power also lands somewhere near the middle of the list — issues regarding a site license in a seismically active region would seem to counterbalance the reliability and affordability of a small-scale nuclear reactor.
The team gave increased gas production from the Cook Inlet and other basins low scores under this criterion because of uncertainties regarding the amount of economically recoverable natural gas that might be discovered.
Viewed from an uncertainty perspective, tidal power seems an improbable option, the team thought. Dunmire commented that although the massive tidal flow in the Cook Inlet appears enticing as an energy source, no one has yet demonstrated a tidal power generation system on a large commercial scale. In addition, silt and winter ice in the waters of the inlet would present significant challenges for a tidal generator — no-one has done a good feasibility study for tidal power in Alaska, she said. Environmental impact The team also evaluated the alternatives by assessing any environmental impacts that are probably unavoidable, after taking into account compliance with environmental laws and other environmental impact mitigation requirements.
On this basis, energy conservation comes out ahead.
“Things like (energy) conservation would likely have a net positive environmental impact, because you’re using the same amount of fuel more efficiently,” Dunmire said.
On the other hand, increased gas production within or adjacent to the region, and coal power, all score relatively low under this criterion because of the necessary industrial developments, such as gas fields.
Other options, including alternative energy sources and the various gas line options, fall in the middle of the list. Conclusions So what happens when you meld together all of the options and criteria? Are there any clearly preferred options for future energy supplies in Southcentral Alaska?
That depends on the timeframe that you are looking at and what happens with regard to a North Slope gas line, the team has concluded.
The feasibility of early implementation will determine the viable options in the near term — energy conservation coupled with increased local gas production seem the obvious short-term alternatives.
Looking a little further into the future, coal gasification seems a good option that could keep industrial facilities operating, as well as providing electrical power. However, the success of this option depends on proving the process and demonstrating the cost-effectiveness of using Alaska coals.
Moving into more of a long-term view, the various gas line options come into play as a means of delivering relatively large quantities of energy. Coal and wind power also seem to have a place in this longer-term perspective.
But, if a North Slope gas line is built, a gas spur line tops the list of options for Southcentral Alaska, Dunmire told the Angda board. That line could deliver relatively large volumes of gas and would cost considerably less than a direct line to Southcentral Alaska from the North Slope.
“It provides a lot of energy service for a medium level of investment,” Dunmire said.
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