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ANGDA looks at Alaska NGL needs Heinze stresses importance of assuring access to NGLs in Alaska; study looks at spur line terminal options for NGL processing Alan Bailey Petroleum News
It’s crucial that the State of Alaska protects its ability to extract NGLs in state from a North Slope gas line. That was a key message from the Alaska Natural Gas Development Authority’s board meeting on July 17.
NGLs, or natural gas liquids, consist of hydrocarbons such as propane and butane that occur alongside methane, the main component of natural gas. Produced gas from an oil field such as Prudhoe Bay commonly contains NGLs, while gas and condensate fields, such as the undeveloped Point Thomson field on the North Slope, contain large quantities of NGLs.
Propane from NGLs is commonly distributed in liquid form as a fuel, while several NGL components form feedstocks for petrochemical industries.
Spur line terminals study The ANGDA board discussion of Alaska NGL related to a study that ANGDA has commissioned, to review options for terminals at the ends of a gas spur line between a North Slope gas line and Southcentral Alaska. Options for these terminals include plants to extract NGLs from the North Slope line at, say, Delta Junction. The spur line could transport the extracted NGLs to Southcentral Alaska.
“One of the things we’ve argued is that you need to understand that option,” Harold Heinze, chief executive officer of ANGDA, said. “It may be in the state’s best interest to recover those NGLs within our borders and do things with them here.”
Heinze said that the economics of processing NGLs within Alaska are “not a slam dunk case,” but that in-state processing might be the right decision for Alaska in the longer term. Consequently, in-state NGL use should be considered in the North Slope gas line contract between the state of Alaska and the gas producers.
“There is one little provision of the contract that basically says that the entity will study the extraction of NGLs in Alaska,” Heinze said. But the state needs to worry about the processing of its own NGLs, he said.
“I don’t find that in the contract and I think that’s an important right that needs to be preserved,” he said, adding that the spur line terminal study that ANGDA has commissioned will start to outline the importance of the issue. Heinze also said that composition of the fluids flowing down the pipeline will impact both the pipeline design and the pipeline tariff structure.
Processing in Alberta Heinze said that, from a business perspective, it makes “infinite sense” for the producers to process the NGLs in existing petrochemical plants in Alberta — NGLs from Alaska would replace diminishing supplies to those plants from other sources.
“It is clearly the premise of the contract, it is clearly the intention of everybody but the state (to move NGLs to Alberta),” Heinze said. “… The concern has been that we not unconsciously or unintentionally export the basis of a petrochemical industry. Somebody has got to keep that option open.”
“You can’t market your methane without dealing with the NGLs. It’s got to be done in some place,” said board member Bob Stinson.
Heinze agreed, saying that the issue becomes critical at the point where the pipeline pressure drops from 2,500 pounds per square inch to 1,000 pounds per square inch. The NGLs would foul up the lower pressure system, he said.
Board member John Kelsey raised the question of using the trans-Alaska pipeline, the oil export line from the North Slope, to ship NGLs — the trans-Alaska pipeline already ships some NGLs along with crude oil. Heinze said that the oil line is already carrying its maximum NGL capacity. Increasing that capacity would require major reconfiguration of both the pipeline and the Valdez Marine Terminal, he said. He also said that the maximum amount of butane that can be shipped with the oil is partly a consequence of the air specifications in California.
On the other hand, a 2,500-pound per square inch gas line “will carry anything and everything we want in the way of NGLs,” Heinze said.
Heinze also said that oil refineries in Alaska are currently producing about half of Alaska’s propane supply of 2,000 barrels per day. The remainder of the supply is trucked in from Canada, he said. ANGDA has long supported the concept of producing propane for use in Alaska from North Slope gas.
But the economics of propane in Alaska are difficult, Heinze said. He said that these economics could be greatly improved by establishing a propane export market from the state. However, current estimates of worldwide propane demand are very uncertain — Heinze cited a recent conference where experts had estimated Chinese propane demand as ranging from zero to the entire current world supply, depending on the Chinese use of coal vs. refined oil.
“Depending on how you answer that question (about coal usage) they’re either self-sufficient in propane or they need all the propane that there is,” Heinze said.
Given that range of uncertainty, it is important to keep open the option to export propane, Heinze said.
Three options The ANGDA-commissioned study on spur line terminals is looking at three possible options for connecting a gas spur line to the North Slope gas line. The study is assessing the very high-level conceptual engineering and feasibility of these options and estimating some potential costs, Heinze said.
A high-end option involves the extraction of NGLs from the entire 4.5 billion cubic feet per day of North Slope gas pipeline throughput. This option sets a marker for a maximum capacity terminal plant.
“People would be challenged to think of a bigger case than that one,” Heinze said.
That option could provide feedstock for three or four world-class petrochemical facilities. Ethane, for example, would be cracked into polyethylene, a feedstock for the plastics industry. But the likely capital costs for plant construction are huge.
“We’re talking $2 billion to $6 billion dollars for some of these plants,” Heinze said.
A second option involves extracting NGLs from 900 million cubic feet of gas per day, a volume that corresponds to the potential state share of North Slope throughput in the line.
The 900 million cubic feet per day case could supply at least one world-scale petrochemical plant and would produce about 20,000 barrels per day of propane, Heinze said. That volume of propane would be sufficient to enable the export of substantial volumes of propane from Alaska. Current Alaska propane consumption could increase to 5,000 barrels per day fairly quickly and 10,000 barrels per day would be sufficient to cover all state needs for a long time, Heinze said.
The third option would involve just tying the spur line into the North Slope line, without any special processing at the pipeline junction. This option envisages a spur line gas throughput (including some NGLs) corresponding to the current in-state usage of 500 million cubic feet per day of natural gas.
“You just throw off a side stream of 500 million, which happens to be the in-state use right now,” Heinze said.
The spur line would transport the gas to Southcentral Alaska, where there would be choices about what to do with the products in the gas stream. This option envisages the fractionation of nearly 12,000 barrels per day of propane, but no ethane-based petrochemical industry.
Heinze pointed out that in assessing throughputs for the spur line and any associated processing plants, ANGDA needs to estimate how much NGL production would pass through the North Slope gas line. Ultimately, the Alaska Oil and Gas Conservation Commission has jurisdiction over North Slope NGL production. But AOGCC has yet to rule on its requirements.
“It is a very major issue from my point of view of how much (NGL) is in that pipeline,” Heinze said. “We’re making our best guesses right now but I’d like to have a lot better information.”
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