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Alaska, Alberta, or Chicago — who will get North Slope gas liquids? Some argue the economics favor a ‘bullet line’ to the expanding Chicago hub; others want extraction in Alaska, Alberta to meet forecast demand in U.S., Asia Gary Park PNA Canadian Correspondent
While uncertainty hangs over the future of an Alaska Highway gas pipeline, a sideline debate is taking place over where ethane and other natural gas liquids from North Slope gas will be extracted.
In one mind, there is no doubt who will make the decision.
The producers — Exxon Mobil Corp., BP PLC and Phillips Petroleum Co. — will have the final say, not the industry, says Norval Horner, vice president of Aux Sable Canada Ltd.
But whether that decision will favor Alaska, Alberta or Chicago is the topic of most speculation.
The prize, assuming North Slope production of 4 billion cubic feet per day, would be 100,000 barrels per day of ethane and similar volumes of propane and butane, he told an Arctic Gas Symposium in Calgary earlier this month.
Horner said he believes Alaska gas will be shipped directly to Chicago, despite Alberta’s insistence that no pipeline will cross through the province without giving the local petrochemical industry access to the liquids.
Aux Sable Canada is the subsidiary of a U.S. company that extracts ethane and NGLs at Chicago from the Alliance pipeline, which delivers about 1.5 billion cubic feet per day of gas from northern British Columbia to the U.S. Midwest.
Aux Sable currently produces 40,000 barrels per day of ethane, Horner said it can be easily and inexpensively expanded in line with Alliance’s capacity to boost deliveries to 2.1 billion cubic feet per day. Good economic for bullet But the Alberta government is still seething over the decision by Canada’s National Energy Board to approve Alliance as a “bullet” line crossing through Alberta without allowing any access to the liquids.
Horner suggested that if Alaska gas enters Alberta and gets mixed in with gas in other pipeline systems, it would be “very likely” that some ethane recovery would take place in the province.
But if the ethane “goes to Chicago as a rich stream, it’s very likely to be recovered in Chicago,” he said.
However, Horner is betting is on a “high pressure, large diameter bullet line” to the emerging Chicago hub, arguing the economics would be “hard to beat.”
Other speakers pointed to options involving the recovery of ethane in either Alaska or Alberta. New facilities possible Mike Hantzsch, vice president of business development at Williams Energy Canada Inc., said his company supports the stripping of ethane before it reaches Chicago and is evaluating the feasibility of a plant in either Alaska or Alberta.
He said such a facility would require feedstock of about 600,000 barrels per day of ethane. Williams already produces 130,000 barrels per day from straddle plants at Cochrane and Empress in Canada.
Under study are new facilities at Fairbanks near Williams’ existing oil refinery or at Fort Saskatchewan, the refining district near Edmonton.
Other possible locations in Canada include Empress, which has surplus processing capacity of 10 billion cubic feet per day; James River, Alberta, the certified junction of the Alaska Natural Gas Transportation System; and other sites in northeastern British Columbia.
Hantzsch said preliminary findings by consultants suggest that polyethylene capacity additions in either Alaska or Alberta are supported by forecast demand growth in the U.S. and Asian markets.
He said about 70 percent of polyethylene produced in Alberta would be shipped to Asia with the balance heading for the western United States, while polyethylene from Alberta would be exported equally between the western and eastern United States.
Hantzsch told the conference the cost of building a petrochemical plant in Alberta would be 1.1 to 1.2 times greater that building one in the U.S. Gulf Coast while Alaska’s costs would be 1.4 times greater.
He argued Alberta has an edge given it advanced petrochemical industry and its underutilized infrastructure, although challenges include the comparative feedstock cost in Alaska vs. Alberta. U.S. liquids prices higher Horner’s case for direct shipments to Chicago was based heavily on the overwhelming flow of liquids from Canada and the United States to the U.S. Midwest and east.
In addition he said liquids fetch an average 6 cents per gallon more in the Midwest than Alberta and even more in Mount Bellevue, a storage and petrochemical center on the Gulf Coast.
He said the six pipelines from the Gulf Coast to the Chicago area are underused and Aux Sable is weighing the possibility of reversing one of the lines to carry ethane to the Gulf Coast.
Meanwhile, planning for Mackenzie Delta gas development involves decisions on who will build the pipeline portion shipping dehydrated gas and liquids from Inuvik to Norman Wells, in the central Northwest Territories, and the pipeline to transport liquids from Norman Wells to northwestern Alberta.
Industry observers think it’s likely the liquids will be shipped south from Norman Wells to Zama via the Enbridge Inc. system — a 12-inch liquids line that has designed capacity of 50,000 barrels per day, but is currently using only 60 percent of that space.
However, a battle is also looming, with TransCanada PipeLines Ltd. — Enbridge’s chief pipeline competitor in Canada — trying to force its Alberta network north to Norman Wells, then requesting that the system be placed under federal jurisdiction that would allow TCPL to boost tolls for unused capacity on its mainline system east of Alberta.
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