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Vol. 24, No.43 Week of October 27, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

North Slope LNG

Direct export of Point Thomson gas to Asia on ice breaking LNG tankers

Steve Sutherlin

Petroleum News

Alaska-based Qilak LNG Inc., a subsidiary of Lloyds Energy of Dubai, has signed a heads of agreement with ExxonMobil, under which ExxonMobil will provide natural gas from its Point Thomson field to Qilak’s proposed nearshore liquefied natural gas facility several miles north of Flaxman Island, Qilak announced in Anchorage Oct. 23.

ExxonMobil would provide at least 560 million standard cubic feet per day of gas to Phase 1 of the Qilak LNG 1 Project, Qilak said.

“ExxonMobil sees the development of the Qilak LNG 1 Project as an opportunity to develop Alaska’s gas resources,” said Darlene Gates, president of ExxonMobil Alaska. “As the largest holder of discovered gas resources on the North Slope, ExxonMobil has been working for decades to tackle the challenges of bringing Alaska’s gas to market.”

The LNG would be shipped directly from the North Slope via ice breaking LNG tankers.

Initially, the project will take natural gas at “sufficient volume to export at least 4 million tons per year of LNG,” Qilak President and COO David Clarke told Petroleum News.

“The agreement at the moment is exclusively with Exxon; once we’re able to talk to Hilcorp, once they take over the BP interests, then we hope to have enough gas to increase that to at least 6 million tons,” Clarke said.

Hilcorp is slated to purchase the 32% share of Point Thomson currently owned by BP, under a $5.6 billion sale of BP’s North Slope assets and operations announced in September.

If all goes well, first gas would ship in 2025 or 2026, Clarke said.

An extensive feasibility study, including preliminary permitting, will begin in 2020, with a target of reaching final investment decision by 2021, said former Alaska Lt. Gov. Mead Treadwell, Qilak chairman and CEO.

The project is to “be supported by Japan’s Bank for International Cooperation (JBIC), as it helps fulfill Japan’s commitment to foster investment in U.S. LNG production capacity and to bring new LNG supplies to Indo-Pacific region,” Qilak said. “This cooperation is expected to grow as the next phase project feasibility is determined.”

Double acting ships

The LNG tankers, designed in Finland, are double acting ships with an efficient bow for open water and thin ice cover, and a heavy ice breaking stern. The ship is run in reverse in heavy ice. The design has better open water performance than traditional ice breaking ships.

Similar vessels have been successfully employed to carry LNG from the Yamal LNG plant located in Sabetta on the Yamal Peninsula, in Arctic Russia.

“The company that designed them has come up with a Mark II version that we would use, very similar but improved performance and LNG capacity,” Clarke said. “We’re very fortunate to have the learning from the Yamal project, and those LNG carriers have really exceeded the expectations in their ability to transit ice.”

“The Russian vessels have successfully broken through ridges that have ice of 10 to 12 meters thick,” he said. “They have the ability to actually mill on the ice with their props.”

Unlike the Yamal project, Qilak will have a much shorter distance through ice to reach the open waters of the lower Bering Sea and North Pacific Ocean - 600 nautical miles versus 2,600 nautical miles.

Aker Arctic Technology Inc. of Helsinki, Finland, did the design work for the vessels the Russians are using, Clarke said.

“They’re the experts in icebreaker design and ice management,” he said. We’ll be kicking off a contract with them shortly to do an ice management study.”

Qilak won’t run ships itself, rather it will contract with experienced major international shipping companies to own and operate its tanker fleet, Clarke said.

Depending on routes and contracts, the fleet will likely number between four and 10 new ships, Qilak said.

Gravity based structure

The LNG plant will be a large gravity based structure, which will be floated into place and ballasted down on the seabed.

“They put hematite, or iron ore, and water in it to weigh it down and it’s possible to refloat it once the field is depleted, and redeploy it elsewhere,” Clarke said.

“Basically, its weight is what keeps it in position,” Clarke said, adding that the structure has LNG storage in its base, the liquefaction plant on the top deck and offloading arms to load the ships.

“Depending on the soil conditions, it may have a skirt around it, but those systems generally have some kind of an air bubbler type thing to release the friction when they want to refloat it,” he said.

“It would be very similar to the design that the Russians are using on the Arctic LNG 2 project, where they’re building three very large 6 million tons per year gravity based structures.”

Clarke said the structure will be built “in a shipyard in Asia, where it’s built under controlled conditions, and you can get a lump sum contract.”

“We’re looking to use a similar type design for Prudhoe Bay in the next phase, and a similar design might work in the Mackenzie Delta in Canada,” Clarke said. “The concept is to design one and build many. It just makes the whole project more manageable; it’s easier to finance; it’s easier to match the supply of LNG to the demand in Asia.”

It is yet to be determined if the LNG plant will be in state or federal waters. It must be far enough offshore to have sufficient depth for year round operations of the LNG tankers.

The location will be “probably about six to 10 miles north of the Point Thomson field,” Clarke said.

The gas pipeline from Point Thomson will be trenched and buried to avoid ice scour, he said.

A gas treatment plant would be located onshore at Point Thomson, adjacent to existing facilities.

“It’s almost like we incorporate the gas treatment facility into the Point Thomson expansion,” he said.

“It’s more efficient to do that from a process perspective, then Exxon is responsible for disposing of the CO2 and H2S,” Clarke said. “It would be what is called pipeline quality gas; it would have the contaminants removed, it would be dry, and we would be able to liquefy 100% of that gas.”

There is a possibility that other entities could sell gas to the LNG facility.

“We could actually go up to 8 million tons, so we could take another 250 or so million cubic feet of gas a day, for example, from Endicott,” Clarke said. “Endicott is a little bit closer to Prudhoe Bay, but it’s roughly midway between the two fields.”

LNG experience

Qilak’s parent company, Lloyds Energy of Dubai, is involved in multiple phases of the natural gas and LNG industry worldwide.

“Lloyds actually handles all parts of the supply chain, so they have upstream projects, but they also have several downstream projects in Asia, where they take the LNG and re-gasify it and put it into local gas grids or use it to generate power and sell power to local grids,” Clarke said. “They recently announced a project in the Philippines with the Philippines national oil company, for a 1,200 megawatt gas powered power plant. It would be a barge mounted, nearshore facility, and could take all the supply from this project, and basically we would be selling electricity.”

“It would be replacing a coal powered plant, so basically we’d have a significant reduction in greenhouse gasses as a result,” Clarke said.

“We’ve got a contract with the Philippines at the moment; there’s another one in China,” Clarke said, adding, “we’re also talking to the Japanese, Koreans, Vietnamese, and Jakarta.”

Clean air synergies are woven throughout the Qilak LNG 1 Project, according to Kalb Stevenson, Qilak permitting specialist.

“When you wean off coal and go to a cleaner burning fossil fuel like LNG, you have about a 45 to 50% reduction in CO2, you get rid of those environmentally damaging sulfides, particulates, and a significant reduction in nitrous oxide,” Stevenson said. “LNG is ... the cleanest burning fossil fuel, and it goes a long way with not only local health impacts related to air, but also global impacts that would be beneficial to reduce CO2 - and those vessels themselves run on LNG, so it’s a cleaner burning transport fuel as well.”

“There’s practically no pollution risk from the transit of the vessels,” Clarke said. “There is a little bit of diesel as a backup, but no heavy fuel oil, and of course the product would evaporate if there was a spill.”

Gas for Alaskans

“The other thing that we're looking at is a way to supply gas to Alaskans,” Clarke said.

“We’re looking to see if there’s an option where we could supply LNG to communities on the west coast,” he said. “We can’t use our LNG carriers because they’re not Jones Act compliant, but we’re looking at either using a smaller vessel to deliver the LNG or putting it in ISO containers.”

Stevenson said the project would open pipeline-based opportunities to supply Alaska communities and projects.

“As Dave mentioned, not only Point Thomson, but if Prudhoe Bay was developed, you take a big first step towards having a gas treatment plant there, so if the state, or the Ambler mining district, or someone decided they wanted to bring in energy, you would already have treated gas at Prudhoe Bay; you would have treated gas at Point Thomson,” Stevenson said. “It wouldn’t be too difficult for a different entity that wanted to pipe gas, let’s say over to Ambler mining district, or even down to Fairbanks, to do something like that because that big expensive facility would already be in place, and all you would really need to do is link in a pipeline to it.”

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