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Vol. 16, No. 50 Week of December 11, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Challenge to propane use

Outgoing ANGDA CEO Heinze believes there may be some waste at Prudhoe

Eric Lidji

For Petroleum News

The outgoing head of the Alaska Natural Gas Development Authority is asking state officials to consider whether propane is going to waste on the North Slope.

CEO Harold Heinze recently sent a letter to the Alaska Oil and Gas Conservation Commission asking the agency to look into the use of propane at the Prudhoe Bay unit.

“We have reached the end of our rope,” Heinze told the ANGDA board on Dec. 7.

Although Heinze sent the letter as a private citizen, the issue is a major priority for ANGDA, which has struggled for years to market North Slope propane for in-state use.

“While the Prudhoe Bay Unit Owners have indicated a willingness to sell propane I have been unable to discern the direction and schedule of the needed actions by the Unit Operator BP. I understand that BP is under no obligation to inform me or the public as to plans, if any, for making propane available,” he wrote, adding that he is worried that the situation on the North Slope constitutes “waste” under the definition in Alaska statutes.

That concern comes from the fact that 500 to 2,000 barrels per day of recoverable propane at the Prudhoe Bay Central Gas Facility isn’t being used, Heinze claimed.

While some propane is used to improve oil recovery, more is injected as residue gas, Heinze claimed. “Because of the limited production life of Prudhoe Bay, the propane that could be recovered and marketed at this time will be left in the reservoir at shut down. That future lost recovery is the preventable waste of a valuable hydrocarbon,” he wrote.

The issue might be a technical concern for the producers.

In April 2010 correspondence that Heinze included in his letter to AOGCC, ConocoPhillips claimed that extracting propane from residue gas would decrease the amount of injectant produced at the facility and could impact enhanced recovery, but told ANGDA it would be “willing to continue discussions to determine whether there are technical or operational innovations that are feasible but have not yet been considered.”

ANGDA said the lack of public information about Prudhoe Bay gas handling made it difficult to find alternatives, but based on “decades old field composition information” said it believed as much as 75,000 barrels per day of propane went back into the reservoir outside of enhanced recovery. “The entire defined in-state market for propane could be satisfied with only a small fraction of this residual production,” Heinze wrote.

ANGDA spent more than a year negotiating with the companies, but “at this point, that conversation has stopped,” Heinze told the board. “I can’t tell you where they are,” he said. “I guess the kindest way you could say it is we’re 25th on a list of 10 priorities.”

AOGCC is scheduled to meet next on Jan. 4, 2012.

Going for gold this year

ANGDA remains bullish about propane, though.

Of the $75 million budget proposal the agency requests for fiscal year 2013, $11 million would go toward projects to increase the use and availability of propane across Alaska.

While it waits to find out whether Gov. Sean Parnell will support that request, ANGDA is in a holding pattern. After discussing the matter for nearly an hour, the board chose to table a resolution that would have allowed its propane coordinator, Mary Ann Pease, to pursue various grant opportunities, particularly from the U.S. Department of Agriculture.

ANGDA believes propane could extend the benefits of North Slope natural gas to rural communities that wouldn’t be along the corridor of any future natural gas pipeline.

The agency wants to create a wholesale supply point at Prudhoe Bay, and gradually build out the infrastructure needed to transport and store the fuel in villages across the state.

ANGDA began studying propane as a solution for rural energy problems many years ago, even coordinating a propane demonstration project in the village of Tanana in 2007, but recently stepped up its efforts by hosting a conference this past spring to promote the fuel and by proposing a wholesale supply source at the Prudhoe Bay Central Gas Facility.

Heinze going to MEA

ANGDA currently stands at a crossroads.

After an eight-year stint as its only CEO, Heinze announced in late November that he plans to leave ANGDA to pursue other opportunities. At the meeting, Heinze revealed that he would be working as a contractor for Matanuska Electric Association, serving as the executive level project manager on the $250 million Eklutna Generation Station.

Heinze plans to stay in his current position through Jan. 17, he told the board. By staying on for another month, Heinze will see ANGDA through the upcoming budget announcement on Dec. 15, but will leave on the first day of the legislative session.

The board held an executive session to discuss recruitment efforts for his replacement.

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