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Legislators told GTL a no-go for ANS gas Gas-to-liquids plant on North Slope could cost $40 billion, would be several times size of any currently operating commercial plant By Kristen Nelson Petroleum News
Alaska legislators, interested in seeing natural gas move off the North Slope, are looking for an alternative in the event a natural gas pipeline isn’t built.
Gas to liquids is a technology that has been discussed for ANS gas, and Rep. Paul Seaton, R-Homer, arranged speakers for a March 2 House Resources GTL hearing.
Those speakers, however, left legislators with little hope that the technology could be used to move either all or a part of ANS natural gas.
Issues are the cost of building a GTL facility on the North Slope, distance from market and costs associated with separating GTL from crude oil both in the pipeline and at either end.
Because of blizzard conditions in Juneau, which kept planes from landing, even the two speakers who had planned to be present in person spoke to the committee by phone.
BP: GTL not best option Mike Gradassi, a project development manager for BP’s Conversion Technology Center in Houston, told the committee that “gas to liquids is not the best project option for Alaska’s North Slope gas.”
“I am a strong proponent of gas-to-liquids technology, but I am an even stronger proponent of identifying and carrying out the best project option for any given gas resource asset,” said Gradassi, who told the committee he has been involved with developing and applying technologies for conversion of natural gas to liquids for 18 years.
GTL is a chemical conversion of natural gas at pressure and very high temperature into syngas, which is chemically converted to a waxy intermediate which is treated to reduce its waxiness and convert it into a pumpable synthetic crude oil.
“This synthetic crude and the refined products made from it are especially attractive because of their properties, purity and cleanliness,” Gradassi said.
The test facility BP has at Nikiski on the Kenai Peninsula converts about 3 million standard cubic feet per day of natural gas into 300 barrels per day of synthetic crude oil.
Resources Co-Chair Carl Gatto, R-Palmer, asked what proportion of the resource was consumed in producing the GTL.
Gradassi said that counting all of the energy requirements, “both for the process itself and also for the supporting utilities,” some 50-60 percent of the resource ends up as GTL. He said you sometimes hear higher figures “if folks are only addressing the process itself, rather than adding in all the additional supporting utilities.”
BP: plant cost high The Nikiski facility cost $100 million to build, Gradassi said, but costs for a plant sized to handle ANS output, 400,000 bpd, would be higher than just scaling up from the Nikiski facility because of the North Slope site’s remoteness and because of the arctic conditions.
“The scale of such a GTL facility is unprecedented and would closely resemble a conventional crude oil refinery in size; would consume about 4 bcf a day of natural gas; and would have an expected capital cost in the several tens of billions of dollars,” he said.
BP has not recently run the costs for such a plant, but can draw on its recent evaluation of a GTL plant for its assets in Columbia. That site is not arctic, he said, but it is more than 600 miles inland on the other side of the Andes Mountains.
Gradassi said that drawing on the engineering evaluation for the Columbian project, a capital cost “in excess of $40 billion is not unreasonable, and this $40 billion is the cost before recognizing the added costs of building a plant that can operate reliably under the severe arctic conditions of the North Slope.”
He said similar costs can be inferred from GTL plant costs published for a 140,000-bpd plant in the early stages of construction in Qatar, a plant one-third the size of what would be required to handle ANS natural gas. “To even consider building a plant at three times this scale, before this one is commercially proven, and do it under the severe conditions of the North Slope, would expose its developers to substantial capital and economic risk as it attempts to compete daily with other lower capital cost and lower operating and maintenance cost GTL plants in other parts of the world.”
Other costs would be incurred in modifying the trans-Alaska oil pipeline to accommodate batched GTL synthetic crude oil, and for separating batched GTL and loading and shipping separate cargoes of synthetic crude and regular crude to market.
Cost of natural gas also an issue ANS synthetic crude oil from a GTL plant would also have to compete with synthetic crude produced from very low-cost gas in other parts of the world, Gradassi said.
In order to be competitive, a GTL plant requires “low capital costs, low-cost gas and ongoing low operating and maintenance costs for plant and transportation infrastructure,” he said.
Every barrel of GTL uses about 10,000 cubic feet of natural gas, “so every $1 per 1,000 cubic feet of gas sent to the GTL plant adds $10 to every barrel of GTL liquid”; $2 per mcf natural gas adds $20.
“And with a GTL plant located on the North Slope, it is reasonable to expect that ongoing operating and maintenance costs would not be low,” Gradassi said.
Sasol Chevron facility sized at 34,000 bpd London-based Peter Cook of Sasol Chevron told the committee that the products of the Sasol Chevron GTL process include “a very high quality diesel and naphtha” and a small amount of LPG, liquefied petroleum gas. Sasol Chevron is a partner with Qatar Petroleum in the Oryx plant, a 34,000 bpd facility which, Cook said “is producing first product” and will begin shipping within weeks.
In response to a question from Gatto about commingling GTL with crude oil, Cook said the diesel coming from a GTL plant “is essentially zero sulfur” and commingling it with crude would “destroy a lot of the value” of the GTL product.
Cook described GTL diesel as “super high-quality, low-sulfur” which is “an excellent blend for upgrading of poorer quality crude.”
The 34,000 bpd Oryx facility will deliver some 23,000 bpd of diesel, about 65 to 70 percent of the throughput, he said.
In addition to blending, Cook said Sasol Chevron believes its GTL diesel could run bus fleets in polluted cities such as Tokyo and London and produce “huge benefits” in reduction of air pollutants.
Other than cost, GTL diesel has a slight fuel consumption disadvantage compared to conventional diesel, Cook said, with a small penalty in miles per gallon, because it is a lighter density than conventional diesel.
Transportation issues on trans-Alaska oil pipeline Godwin Chukwu, professor of petroleum engineering at the University of Alaska Fairbanks, has been studying transporting GTL and told the committee that work on a second phase of a Department of Energy funded study is almost complete.
Chukwu said the study looked at three batch-flow methods and at commingling crude and GTL and moving them as a single fluid.
Challenges to operating the pipeline with GTL include gel formation, vapor formation or flashing and precipitation and deposition of solids in the line which could cause corrosion.
There are three ways to separate liquids moving through a pipeline, Chukwu said. The simplest is air batching where physics provides fluids control and there is, theoretically, a 300- to 500-foot intermix zone between the liquids. Mode B would use pigs to physically separate the oil and GTL with the number of pigs dependent on the optimal size of slugs of GTL and crude oil.
The third mode would use probes in the line tied to automatic control valves to separate the fluids. This method has been tried in Canada, Chukwu said and while comparatively this method would be expensive, it helps to maintain GTL purity.
Costs for batch shipping would include new holding tanks on the North Slope and at the Valdez Marine Terminal and relief tanks at the pump stations.
Commingling issues If conventional crude oil and GTL were commingled for shipment, the desirability of the GTL is lost, Chukwu said, but there would be a higher output of diesel and gasoline from refineries using the mixture. The loss of value from having pure GTL would be balanced because the spending on new infrastructure wouldn’t be required.
Chukwu said the tendency of the fluid to gel was studied at different ratios of crude oil and GTL. This is not an issue at normal operating temperatures, but could be a problem if there was a prolonged shutdown of the pipeline at cold temperatures. The study found that at higher percentages of GTL in a mix the gel rate decreases, but at lower rates of GTL the gel threat increases, so there would be a problem with a minimum GTL mix with crude oil at very cold temperatures.
If gelling occurred during a shutdown, he said, it would require more horsepower to restart the flow.
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