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Yukon Pacific proposes 2.2 billion cubic foot project Would market a mix of LNG, propane, plus petrochemical feedstock Kristen Nelson Petroleum News Editor-in-Chief
The momentum for a natural gas project has gone to a pipeline through Canada to the Lower 48. In fact, says Yukon Pacific Corp.’s Ward Whitmore, the company has been asked over the last year and a half why anyone would want to look at a liquefied natural gas project at all.
At that point, Whitmore told the Alaska Natural Gas Development Authority (see related story this page), Yukon Pacific completely changed its concept. The company, which holds major permits for a gas pipeline to Valdez and a liquefied natural gas plant at Anderson Bay, was formerly looking just at “taking gas from Prudhoe down to Valdez, liquefying it and shipping it to Asia,” he said June 16.
“About 18 months ago we completely changed our concept and we are now talking about transporting a mix of hydrocarbons to Valdez,” Whitmore said. The hydrocarbons would be separated at Valdez and sold to various end markets, with LNG going to the West Coast and Asia, and propane going to Asia. Ethane and butane would be used as feedstock for the petrochemical industry and in natural gas liquids could be injected into crude oil.
The objection to just an LNG project, Whitmore said, was that it had to be so big to be economic that “it couldn’t get in the market in a timely manner.” The new goal is “to try to hit multiple markets in order to get the hydrocarbons into the market in a timely manner, get the revenue quickly and help the project economics.”
Yukon Pacific told the Legislature in March 2002 that it was downsizing its project — to 1.4 billion cubic feet a day and a 30-inch pipeline, with a proposed cost of $9.5 billion with ethane and propane sales in addition to LNG. This project Whitmore described is 2.2 bcf a day, a 36-inch pipeline and an estimated $13 billion cost.
Whitmore said that the biggest difference in the last 10 years is the emergence of an LNG market on the West Coast of North America. “And we really want to see if we can get into that one,” he said. While Yukon Pacific is still looking at Asian markets, “our premises have changed and we see the West Coast of North America as the primary LNG market and possibly the exclusive LNG market for the project,” Whitmore said. Two cases Yukon Pacific has actually developed two descriptions: a base case, which includes more heavy hydrocarbons, and a lean case. Whitmore said Yukon Pacific looked at two cases to demonstrate that the project works with either richer or leaner gas. Both involve a high-pressure gas pipeline, above 1,300 pounds per square inch. At that pressure you can pack a lot of hydrocarbons into gas and take them down the line without having them drop out as liquids, he said, and you can pull methane off anywhere along the line to go to communities, and just keep the liquids going down to Valdez.
The project Yukon Pacific has priced out is based on 2.2 bcf a day, but the gas pipeline is expandable to handle up to 3 tcf a day. A spur line to Southcentral is not included in this project, Whitmore said. The assumption is that someone else would undertake to build a spur line from Glennallen south. LNG plant critical path The critical path for construction is the LNG plant, not the pipeline, he said, because the winter seasons in Valdez are hard to work in. Two trains would be built. The first train is put on line at 1.1 bcf a day, operating the pipeline at 50 percent capacity. Then, while production is occurring from the first train, the second train is finished along with some compressor stations along the pipeline and then the facility is at full capacity.
If a contract were signed today, he said, “we’d be talking about half (of the production) starting up seven years from now, the other half eight years from now.”
This schedule is possible because Yukon Pacific has major permits in hand, he said.
Whitmore said it’s almost a Catch-22: “If you don’t have the permits and you establish a market, you have to tell the market to hang on until you’ve demonstrated permits.” Since Yukon Pacific has the permits, he said, “we can talk about a market now, and we think that’s an advantage.”
Paul Fuhs of Yukon Pacific told the authority board that recent LNG contracts, such as Sakhalin, are long-term: 24 years in that case, with a delivery date of 2007. Bonds are sold five to seven years in advance of delivery, he said, based on long-term contracts.
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