Providing coverage of Alaska and northern Canada's oil and gas industry
April 2011

Vol. 16, No. 15 Week of April 10, 2011

ANGDA promotes the virtues of propane

Says that marketing of propane extracted from North Slope central gas facility would benefit both oil companies and Alaskans

Alan Bailey

Petroleum News

For several years the Alaska Natural Gas Development Authority has been promoting the merits of distributing propane from the North Slope as a fuel for use in remote Alaska communities, to offset the high cost of rural diesel fuel and fuel oil. Propane is a clean-burning fuel, easily transportable in tanks, and would be significantly cheaper than current fossil fuels used in rural communities for heating and power generation, ANGDA thinks.

ANGDA’s initial concept involved pulling propane from gas travelling down a future North Slope gas line, with propane off-take points at places such as the Yukon River crossing, from where propane tanks could be carried by barge along the Alaska river system to where the fuel is needed.

But with the potential completion date for a gas line some years in the future, the initial concept morphed into a plan for a standalone propane production facility on the North Slope, separate from the oil producers’ facilities but taking as feedstock some of the gas production from the oil fields. And the propane distribution concepts evolved, with people seeing the possibility of trucking propane on the road system, and also shipping propane tanks by sea to coastal communities around the state’s perimeter.

Propane at source

During an ANGDA-organized Alaska North Slope Propane Conference in Anchorage on March 31 and April 1 the state-owned corporation rolled out a further development of its propane concept: modification of the North Slope Central Gas Facility to extract propane “at source” where the propane content of the gas stream is especially high, with the extracted propane being piped to a North Slope propane marketing facility.

With extraction of propane in the Central Gas Facility being the cheapest and most efficient approach to producing the fuel on the North Slope, a large-scale propane production capability on the slope could open up new commercial opportunities, perhaps with the export of propane to the U.S. market or even to markets in Asia, as well as to Alaska’s internal markets, Mary Ann Pease, the ANGDA propane supply coordinator, told the conference.

Currently most of the propane that comes out of the North Slope oil fields is re-injected back into the field reservoirs. But, with people seeing the possibility of 110,000 barrels per day being eventually pumped along with natural gas down a future gas line, there is a huge opportunity to generate an Alaska-based propane industry, taking advantage both of the relative ease of transporting the fuel around the state and of Alaska’s geographic position on the great circle trade route around the Pacific Rim, Pease said.

“Right now it’s a stranded resource that’s being re-injected back into the ground,” Pease said. “We’re hoping that we can get that to a price point that would be very attractive for our state and also open up an export opportunity. … We’re talking about a world-class opportunity here and a market opportunity that goes well beyond gas and oil.”

Compelling case

And although Alaska’s internal market of perhaps 2,500 to 3,000 barrels per day of propane might not be of a sufficient scale to motivate the North Slope producers into modifying their facilities, the prospects of shipping perhaps 20,000 to 30,000 barrels per day to wider markets could create a compelling business case for propane development, Pease said. Not only that, propane could prove to be an attractive North Slope vehicle fuel, as an alternative to the expensive ultra-low sulfur diesel that currently has to be trucked to the slope, she said.

Pease said that ANGDA has been talking to the North Slope producers about its ideas and has sent a letter to the producers requesting an evaluation of the Central Gas Facility, a look at a design concept for a new propane separator and the development of some cost estimates for facility modifications.

“What we have been meeting and talking to the producers about is the (facility) optimization, and allowing them to put in the necessary controls on the North Slope that would create a wholesale facility,” Pease said. The wholesale propane price on the slope might be in the range 35 to 50 cents per gallon, she said.

And Lt. Gov. Mead Treadwell said that Alaskans always need to be mindful of the potential value of the huge quantities of natural gas liquids, such as propane, on the North Slope.

“There’s a huge amount of propane in Prudhoe Bay. … It’s a world class supply,” Treadwell told the conference.

Transportation technology

Pat Malara, from fuel tank and fuel transportation equipment company Western Cascade, described to the conference some of the options now available for storing and transporting propane, including 40-foot tanks with capacities in excess of 11,000 gallons that can be carried on road trailers or by ship. Some tank and trailer configurations include pump systems that allow the tanks to be used for bulk propane storage as well as for transportation, he said.

And with limited propane production capacity in Pacific Northwest refineries there are opportunities to ship Alaska propane south, he said.

“This stuff excites me. I’m really amazed that this hasn’t already been done, especially with the richness of the (gas) stream up here,” Malara said, adding that Alaska already has the necessary infrastructure to support propane transportation.

Rural use

Bear Ketzler from the interior community of Tanana, the location of a rural propane demonstration project conducted in conjunction with ANGDA, said that trial use of propane in Tanana had demonstrated particularly high cost savings for clothes drying in the village laundermat. The use of propane in a new highly insulated teacher house had also been particularly successful in helping make the teacher’s winter heating costs affordable, Ketzler said.

Propane is especially attractive as an alternative to ultra-low sulfur diesel fuel for rural villages, with the new diesel fuel being more expensive to both buy and store than the old diesel fuel, Ketzler said.

Ingemar Mathiasson, a resident of the village of Ambler in northwest Anchorage, also commented that villagers would prefer propane over ultra-low sulfur diesel fuel. Propane equipment, such as propane stoves and freezers, also tend to outlast the equivalent electrically powered equipment, he said. And the use of propane rather than electricity for powering appliances might help a household avoid exceeding the power consumption limit for receiving state funding from the power cost equalization program, he said.

Alternative fuel

Worldwide, propane is a well established alternative fuel for motor vehicles.

And Hawaii, where propane is widely available as a transportation fuel, provides an interesting case study in the operation of a propane infrastructure. The propane is pulled from a refinery on Oahu and is shipped between the islands on propane barges — the infrastructure includes a 1 million-gallon storage facility, Malara said.

Todd Mouw from Roush CleanTech, the alternative fuel-powered vehicle division of Roush Industries, overviewed various propane vehicle conversions that his company has developed, primarily for various models of Ford commercial vehicle.

Propane is the only alternative fuel that is ready for prime time, Mouw said. The fuel costs for a propane vehicle are substantially lower than those for a gasoline or diesel vehicle, while the performance of a propane engine is similar to that of a gasoline engine. The use of propane reduces greenhouse gas and other emissions, while also reducing the need for foreign oil, he said.

The use of propane “is the biggest no brainer for fleets in the Lower 48,” Mouw said.

Generator technology

Larry Osgood from the Propane Education and Research Council described a new generation of propane fueled electricity generators that can be used for domestic power generation, or for commercial scale applications. These systems can, among other things, be used in combination with solar systems or small wind turbines, balancing the fluctuating solar or wind power, he said.

However, while the U.S. Congress has viewed propane as an alternative fuel to conventional fuels such as gasoline, the U.S. Department of Energy is focusing its alternative fuel efforts on biodiesel, ethanol and electricity, Osgood said. As a consequence DOE actions have increased rather than reduced U.S. dependence on foreign oil, he said.

Propane is easy to transport, easy to store, does not cause ground contamination and is readily available Osgood said.

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