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Vol. 15, No. 17 Week of April 25, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil Patch Insider

Sulfur recycling at Nikiski; Kvisle says North Slope, Mac gas needed; Cameron’s ‘Convenient Untruth’; gas, at last (for Homer)?

It might have happened two and a half years ago, but since it’s a once-in-a-decade occurrence at the Nikiski, Alaska, facility, it’s still news … relatively.

The first refinery in Alaska to invest in equipment to produce ultra-low sulfur diesel ($64 million price tag) is featured in the May edition of Process Engineer magazine for doing something else that’s good for the environment, but not-so-good for the bottom line. Instead of disposing of its sulfur, a byproduct of making diesel from crude oil, Tesoro Corp. sold the 36,000 tons of sulfur it had stored at its Kenai Peninsula refinery to a third party, which took possession of it at the port of Homer and shipped it to China for use as a fertilizer.

“We produce 10-to-15 tons of pure sulfur every day,” Kip Knudson, Tesoro’s external affairs manager, told Petroleum News April 21. “It’s inert and stored in a specially prepared site. When we can lose the least the least amount of money on it, we sell it.”

It is something that used to happen “once a decade but now that we making ultra-low sulfur diesel, it will be more often, maybe once every five years,” he said. “Either that or we will have to expand our storage area.”

The sulfur is “valuable for places in the world that have base soils. But Alaska’s soil is acidic so it’s useless up here,” Knudson said.

“We try to ship it when the sulfur market moves … so we lose less money. We’re so far from a market. If you’re lucky, the cost of transporting it to the ship and putting it on the ship matches the value of the product.”

There is a lot of sulfur “floating around in the world right now, especially with low-sulfur regulations,” so that does not bode well for profitability in the future, Knudson said.

If you’d like to read the entire article go here: http://bit.ly/aQSKfO

As far as he could tell, Knudson said, everything looked technically correct. Except maybe the profitability part. “Break even” would have been closer to the truth.

But the companies handling the recycling, he said, did “a very good job for us.”

Smooth hand-off at TransCanada; Kvisle says North Slope, Mackenzie gas still needed

The way things have been at TransCanada over the past decade are the way they will likely continue for the next decade as part of the company’s outwardly seamless changing of the guard.

When Hal Kvisle steps down as chief executive officer at the end of June, the levers of control will be passed to chief operating officer Russ Girling, Kvisle’s acolyte through the early years of this century as TransCanada slashed C$4 billion of debt following its C$14 billion takeover of Nova Corp., added power production, natural gas storage and crude oil transportation to its dominant role as a natural gas pipeline and wrestled its way to the forefront of candidates to carry gas from Alaska and the Mackenzie Delta.

Girling has made his priorities clear.

He said the strategy developed under Kvisle and with the TransCanada leadership team has worked “very well for us” over the past 10 years.

A C$22 billion capital program is under way and his “primary job is to get that done on time and on budget and deliver the associated cash flow to our shareholders,” Girling said. Right out of the Kvisle playbook.

Kvisle said the fact that President Barack Obama’s administration has given a high priority to an Alaska gas pipeline means that is where the spotlight is focused.

But, that perception aside, he said TransCanada has not been spending a disproportionate amount of time and effort on Alaska.

For Kvisle, the big item to sign off his time at TransCanada was to see the first oil flowing through the US$5.2 billion, 450,000 barrel-per-day Keystone pipeline from the Alberta oil sands to the U.S. Midwest, opening the way to the U.S. Gulf Coast refineries.

Now Girling inherits the Arctic pipeline projects and factoring those into the outlook for supplies from North America’s shale gas deposits.

Despite some of the extravagant predictions for shale gas, Kvisle departs the scene reluctant to “conclude that the long term gas supply for North America is in the bag.”

He has said that more reserves and potential reserves are on hand than we ever thought, but “the big question is at what rate it will come out of the ground and will it be enough to not only sustain flat production, but also meet what I think is going to be 1 billion to 2 billion cubic feet per day growth in demand due to the power sector.”

Kvisle said TransCanada is more worried about a supply shortfall than it is about demand, noting that maintaining current production over the next five years means about 75 billion cubic feet per day of natural gas must be brought onstream in the United States, Canada and Mexico.

Given that equation, he said it is not hard to see how a combined 5 billion cubic feet per day will be needed from Mackenzie and Alaska, given that production from Western Canada has lowered volumes on the TransCanada mainline by 1.5 billion cubic feet per day.

Girling said Alaska is still a long-term lead project that needs eight to 10 years of work from the time a corporate go-ahead is given until the first gas flows.

“Obviously we have a job to do in terms of growing the company within the next decade,” he said.

Natural gas, at last (for Homer)?

That’s a recent headline in the Homer Tribune.

“A long-awaited, often-touted natural gas pipeline from Anchor Point to Homer may finally come to fruition thanks to the Alaska Legislature’s recent passing of $4.8 million in appropriated funding for the plan,” Naomi Klouda, author of the piece, wrote.

The project, she said, was the “first to survive Gov. Sean Parnell’s veto pen.”

The project includes a pressure-reducing station at Anchor Point. Once built, the Homer Tribune article said, “Enstar would be able to sell natural gas to Homer and Anchor Point consumers.”

Read the full article here: http://homernews.com/stories/042110/news_3_002.shtml

Latest on Avatar boss James Cameron: Lights, action … pontification

Oscar-winning movie boss James Cameron has plainly found new outlets for his artistic and activist leanings.

The Canadian-born director of Avatar has stepped up his campaign against Alberta oil sands and expanded his crusade against fossil fuels to include proposed carbon cap-and-trade legislation, clean-coal technology and possibly U.S. offshore drilling.

Avatar, for those who might have missed it, is a futuristic tale about humans battling a tribe of blue-skinned aliens over the treasured resources of their planet, Pandora.

The inhospitable opening scenes have been likened to the blight of northern Alberta’s landscape resulting from oil sands open-pit mining operations.

In fact, he’s done little to downplay such speculation, claiming the billions spent on oil sands development “is doing greater and greater environmental damage, pursuing a dead-end paradigm, which is fossil fuels, instead of … building wind turbines.”

Cameron said the oil sands region also is a great wind belt, which could generate clean energy.

Just in case anyone should think Cameron is using and abusing his newly won public platform, he rejected any notion that he is “coming off as a kind of overnight expert.”

“I have been studying this stuff for a long time, really for 20 years, and I’m pretty up to speed on all the issues. I actually think that as an artist and an activist I’ve got something to say. A lot of people have been reaching out to me from various groups around the world to see if there’s something I can do to help them in their causes,” he said.

They include indigenous people from the Athabasca oil sands region.

Cameron does not lack for allies, among them Brian Mason, leader of a handful of Alberta legislators from the left-wing New Democratic Party

Mason challenged the government on plans by Petrobank Energy and Resources to use its so-called toe-to-heel-air-injection, or THAI, method to extract bitumen from deep deposits.

The process involves injecting air to a controlled underground fire, setting off an explosion and creating temperatures as high as 600 degrees, turning the bitumen into a liquid, allowing it to flow to the surface.

Mason suggested such a blaze could set northern Alberta aflame. Energy Minister Ron Liepert confessed he knew nothing about THAI, which might have been more of a political blunder than Mason’s vivid imagery.

What Cameron, Mason and Liepert may not be aware of was a proposal some 50 years ago by Alberta’s Social Credit government to set off a nuclear explosion to liquefy the bitumen. No wonder subsequent governments have crawled into a cave whenever there is talk of using nuclear power to fuel oil sands operations.

But, now that he is in full cry, Cameron is becoming Hollywood’s latest voice to scold and lecture politicians and the petroleum industry.

In an interview with CNSNews.com, he opined that the carbon cap-and-trade bill before Congress is likely not the “right answer” to combat global warming, although some mechanism “that puts a price on carbon and charges for it accurately is absolutely necessary.

“The problem is that renewable sources only look bad economically when you’re looking at an inaccurate pricing for gasoline and for coal that doesn’t take into consideration the so-called externalities of fighting wars in another region in order to defend our oil supply lines.”

Cameron rejected the notion of new coal technology, arguing clean coal is an oxymoron. “It’s fantasy technology. It’s science fiction technology. It hasn’t been proven yet and carbon sequestration hasn’t been proven yet,” he said.

The only limitation Cameron placed on his ability to make all things bright and beautiful was a concession that he need to “know more about” President Barack Obama’s offshore drilling proposal.

“I’m not completely against offshore drilling as long as it is out of sight, over the horizon, but I’d be much happier if it was offshore wind,” he declared.

MMS recognizes companies for safety excellence

The U.S. Minerals Management Service said April 15 that its 2009 District Safety Award for Excellence, or SAFE, recipients for the Gulf of Mexico Region were Anadarko Petroleum, Eni US, Mariner Energy and Chevron, which received two SAFE awards for different districts.

The SAFE program “recognizes those operating companies that conduct their operations in a safe manner, adhering to all regulatory requirements, employing trained and motivated personnel, and enhancing safe operations,” MMS said in its press release.

The award program was established by MMS in 1983 to recognize and honor companies that make a concerted effort to train and motivate their employees to conduct offshore operations in a safe and environmentally sound manner.

Former Enstar Alaska chief appointed to Missouri Gaming Commission

When Barrett Hatches left Alaska in 2001 after serving two years as president of Enstar Natural Gas, he became president and CEO of Northern Indiana Public Service Co.

In 2004 Hatches, a Democrat, moved to Kansas City to serve as chief operating officer of Swope Community Enterprises.

In mid-April, Missouri Gov. Jay Nixon appointed Hatches to the Missouri Gaming Commission, which regulates casinos and bingo halls.

The appointments are subject to Missouri State Senate confirmation.



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