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Low sulfur diesel plant up to the task New $64M distillate desulfurization unit at Tesoro’s Nikiski refinery can be expanded in event of increased demand in Alaska Alan Bailey Petroleum News
With the startup at the end of May of the new $64 million distillate desulfurization unit at Tesoro’s Nikiski refinery on the Kenai Peninsula, Alaska now has an in-state source of low sulfur diesel. The plant’s initial 10,000 barrel-per-day capacity should be more than adequate to meet Alaska’s current demand for diesel fuel for road vehicles. But the plant’s expansion capability to 14,000 bpd could provide extra production capacity in the event of increased demand levels, Kip Knudson, Tesoro’s external affairs manager, told Petroleum News July 11.
“It’s nearly impossible to predict with any certainty what the (Alaska) demand for diesel fuel for vehicles will be,” Knudson said. A major industrial project in the state, for example, would likely increase the use of diesel-powered trucks.
To reduce air pollution, the U.S. Environmental Protection Agency has mandated that mobile diesel engines use ultra-low sulfur diesel fuel with a maximum of 15 parts per million of sulfur and particulates. And, although the Alaska demand for diesel fuel to power vehicles is very small, the ability to produce the fuel in state eliminates the need to import the fuel from elsewhere.
“We made the (desulfurization unit) investment so we can produce the EPA-required ULSD for Alaskan consumers,” said Tesoro’s Chief Operating Officer Bill Finnerty at a dedication ceremony for the new plant in June.
Several Alaska contractors, including Udelhoven Oilfield Systems Services, Peak Oilfield Service Co. and Big G Electric have worked on the construction of the new plant, Tesoro said.
“At times over the last year contractor employees outnumbered refinery employees,” said Steve Hansen, Nikiski refinery manager.
Tesoro first opened the Nikiski refinery in 1969 to refine crude oil from the new Cook Inlet and Kenai Peninsula oil fields.
“We are very proud of Tesoro’s 38-year history in Alaska and the distillate desulfurization unit investment creates a bright future for the Kenai refinery,” Hansen said.
Rural Alaska An EPA exemption for the mandated use of ultra-low sulfur diesel in rural Alaska until 2010 has reduced the Alaska demand for the new fuel in the immediate future. That gives the new Nikiski plant some spare capacity in the near term.
But the fact that new diesel-powered trucks, for example, have engines that will only run on the ultra-low sulfur fuel could trigger a shorter term rural need — if someone ships a new truck to the Alaska bush, that truck will require the new fuel, Knudson explained.
And the need for rural Alaska to convert to the new fuel for all mobile diesel engines by 2010 is itself causing some headaches, because of the practical issues associated with the rural fuel supply infrastructure. In particular, the ultra-low sulfur diesel has to be segregated from the higher sulfur diesel types, to avoid sulfur contaminate of the new fuel. But arrangements for shipping diesel fuel to rural communities do not readily enable the segregation of the fuel into different types, Knudson said. And storage of ultra-low sulfur diesel in rural locations would require the use of dedicated tanks.
According to the Alaska Department of Environmental Conservation, some of the diesel-powered electrical power plants that are ubiquitous in rural Alaska may need to use ultra-low sulfur diesel beginning in 2010. But EPA has not mandated the use of ultra-low sulfur fuel when diesel is used as a heating fuel.
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