Rich gas, small line could be economic

Pipe configuration, gas composition affect possibility of moving Alaska North Slope gas to Cook Inlet, says report prepared for ANGDA

Kristen Nelson

Petroleum News Editor-in-Chief

If you want to move North Slope natural gas to Southcentral Alaska, think of including ethane, butane and propane — and think of moving that rich gas mixture in a small high-pressure pipeline.

That was one thing that came out of a report prepared for the Alaska Natural Gas Development Authority by Michael Baker, which was contracted to further define an all-Alaska liquefied natural gas project.

Ward Whitmore, an engineer with Michael Baker, gave the authority’s board an overview of the draft report April 4.

Harold Heinze, the authority’s chief executive officer, said Michael Baker was asked to identify “the key pieces we need to understand to figure out how to pipeline North Slope gas to tidewater.” He told the board the report indicates there are “ways to get North Slope gas to tidewater that make sense.”

Expandable or non-expandable pipe

What the authority wanted, Whitmore said, was to have “key leveraging technical and design issues” identified.

One of those issues is the pipe, he said, even though for a liquefied natural gas project the pipe is only 35-40 percent of project cost.

What’s at the ends of the pipe, “the conditioning plant, the liquefaction, the trains — all that can be added in discrete units as the flow rate increase, but your pipe cannot,” Whitmore said.

That, he said, makes whether you plan an expandable or a non-expandable pipeline an important issue.

Whitmore said Baker found that “for about the same capital cost, about the same cost of service, you can either put in a small-diameter pipe with a whole lot of (compressor) stations … or you can put in a large-diameter pipe with fewer stations.” A smaller pipe makes sense for a very low flow rate, he said. But if you have increasing flow rates over time, you can only add so many compressor stations to a small line before the smaller diameter line isn’t economic.

ANGDA asked for an analysis of flow rates in the range of 1 billion to 2 billion cubic feet a day, a rate at which cost of service is about the same for a 30-inch pipe with more stations or a 36-inch pipe with fewer stations, Whitmore said. With the smaller line, once you expand beyond what you can do by adding stations you have to go to looping, “putting parallel lines between your stations to get the flow rate up;” with the larger-diameter line you have more ability to handle increased flow by adding compressor stations.

The economic conclusion from a cost-of-service analysis “was pretty straightforward: if you have a choice, put in an expandable pipe,” Whitmore said. In addition to capital cost and cost of service, Baker also looked at return on investment. Not surprisingly, he said, for a very low flow rate “putting in a smaller pipe makes sense.” If the flow rate remains low and you put “in a huge pipe, you never return that capital, you never use that capacity.”

But an analysis for larger and larger flow rates, he said, shows that as you add more and more compressor stations you also have rising fuel costs, and the smaller diameter pipe doesn’t make sense.

Whitmore said a 30-inch pipe with more compressor stations or a 36-inch pipe with fewer stations had similar costs of service over time.

Smaller line: enriched gas

Methane, ethane, propane and butane are recoverable at Prudhoe Bay. “Right now anything heavier than butane — and part of the butane —they blend in with the oil” for sale down the trans-Alaska oil pipeline.

Some of the larger projects being discussed “exhaust all the reserves at Prudhoe Bay,” he said, but a smaller project such as ANGDA’s 1 billion cubic foot a day project, theoretically could exhaust the ethane, propane and butane in 25 years, but not exhaust the methane.

And a small ANGDA pipeline would want to preferentially carry heavier gases, which enrich the gas, raising the heating value of the gas and per-unit revenues.

This requires a dense-phase pipeline.

All of the projects under discussion to take North Slope gas to market are dense-phase, high-pressure lines, quoted at 2,500 pounds per square inch pressure. These pipelines are designed to keep the heavier gas from dropping out as liquids by keeping them in what is called dense phase which “essentially has properties of both a gas and a liquid,” Whitmore said.

At a compressor station the line is at 2,500 psi, and it may drop to 1,500 psi before it reaches the next station, a “phase envelope” which prevents heavier gases from condensing out, collecting in low parts of the line and periodically moving through the line as a slug of liquid which can damage the pipe and equipment at compressor stations.

Small line to Nikiski

The facilities at Prudhoe “already preferentially extract ethane, propane and butane that they use for enhanced oil recovery,” he said. The theory behind the smaller line is that since those heavier hydrocarbons are available you use a small, high-pressure line to ship them to Nikiski, with a relatively small amount of methane, “split it out down there and sell the propane to Asia, sell the ethane and butane locally and essentially use the revenues from these NGLs (natural gas liquids) to help subsidize the gas delivery to Cook Inlet.”

Baker looked at three different flow rates through a 24-inch pipeline and ran some estimates on costs of delivered gas in Cook Inlet.

“The purpose of this was not to identify any specific concept,” Whitmore said, but just to say “here’s a different way of looking at it that might make sense in the future.”

And, he noted, a 24-inch line to Nikiski doesn’t let you market all of the natural gas off the slope.

Bringing North Slope gas to Cook Inlet wouldn’t be economic for just heating and power generation, Heinze said. With today’s large industrial customers, a 24-inch line would supply the gas needed. If you see more industrial use in the future, you may want to look at a larger line. “But 24-inch will supply easily double the current Cook Inlet usage entirely by itself.”

Pipeline, gas composition crucial

Heinze said Michael Baker also worked with Williams Brothers and AG Edwards on the report, each “very reputable” in their fields. “The tools that were used here are very standard tools that are kind of industry standards and pretty reproducible.”

A lot of people have spent a lot of money designing pipelines to take North Slope gas to market, Heinze said. “But we’ve never seen any of the details … And this study at least is an attempt to put the kind of details on the table that we know they did. This — we worked the problem the way they would work the problem.”

The study was focused on 2 billion cubic feet a day and smaller because there are “already enough people out there looking at larger” pipelines. The focus of this study, Heinze said, is an Alaska-sized line.

Earlier lines lower pressure

“Everybody who has talked about and is proposing a pipeline, including ourselves, is talking about operating at this higher pressure, 2,500 psi.” When applications were filed for the original projects, those applications looked at pressures “at least half that,” he said.

That’s because what people are proposing to transport today is different than what they looked at 25-30 years ago.

“The Canadian system moving out of Alberta is premised on about 1,000 psi pressure,” Heinze said. “The stuff we would be carrying would be incompatible with their system. … in Delta we could make our stuff compatible with their system and keep all the goodies.”

Heinze said “the actual design we looked at was premised on taking half out.”

He said ANGDA has “estimated that you could meet the energy needs of the Yukon-Kuskokwim with about 2,500 barrels a day of propane.” There would be 100,000 bpd of propane going through the line and if ANGDA took 50,000 barrels off, “we could probably supply the coastal communities and all that and still have 30,000 to 40,000 barrels a day of propane left over.”

How the facilities are operated on the North Slope is a big part of this, Heinze said, and “there is nothing in the public record that helps you and that’s one of the purposes of a whole chapter in this report is to put it out there.”