With an increasing air of pessimism around the prospects for a pipeline to export natural gas from the North Slope, there is talk of alternatives for monetizing the vast quantities of gas stranded in Arctic Alaska.
One alternative was discussed by Deo van Wijk, chairman of Swiss company Janus Methanol AG, before the state House Resources Committee. Van Wijk described the use of natural gas to synthetically produce gasoline for export from Valdez.
Gasoline production would involve two stages: production of methanol from natural gas on the North Slope, and production of gasoline from the methanol in Valdez. Methanol produced on the Slope would be blended with crude oil for transportation through the trans-Alaska oil pipeline to Valdez, where it would be distilled out of the oil for processing into gasoline.
In addition to providing a market outlet for North Slope gas, the proposal would boost the volumes of fluid flowing down the trans-Alaska pipeline. Because methanol is an excellent antifreeze, the mix would help prevent problems with ice forming in the line, van Wijk said.
The processes involved are already in commercial operation in several parts of the world, van Wijk said. Economies of scale require gas supplies of at least 640 million cubic feet a day, he said.
The two-stage process of manufacturing gasoline from natural gas is an alternative to the perhaps more familiar gas-to-liquids, or GTL, process, in which natural gas is converted to a fluid very similar to diesel fuel. But GTL produces wax as a byproduct, and wax can cause problems with pipeline clogging, van Wijk said.
Exxon originally developed the process, known as MTG, and successfully constructed an MTG plant in New Zealand in the 1980s, van Wijk said. However, falling oil prices in the 1990s rendered that plant uneconomic, he said.
Some years later the Chinese resurrected the process to produce gasoline from methanol generated from coal, van Wijk said.
Over the years Janus Methanol engineers have improved the methanol generation part of the process, eliminating the need for processing modules that were part of early plant designs and dramatically reducing costs, while increasing production, he said.
But with world demand for methanol itself being quite low, the best use for the huge volumes of methanol that can now be produced is to feed the methanol into the MTG process, van Wijk said. Gasoline produced from methanol contains relatively low levels of benzene and no sulfur; the process for generating the gasoline produces only gasoline and water, he said.
Van Wijk said his company is interested in the possibility of natural gas to gasoline production in Alaska, and he has done estimates of the economics. Assuming that construction costs in Alaska would be double those elsewhere in the U.S., the construction of a complete system that could produce about 63,000 barrels a day of gasoline would come in at about $5.2 billion, van Wijk said. With labor costs for operating the plant perhaps averaging $150,000 a person and taking into account all costs, including the return on investment in the plant and depreciation, gasoline could be delivered for shipment from Valdez at $2.65 to $2.85 per gallon, including a $1.45 margin, he said.
"If you compare that with today's wholesale prices in excess of $3 per gallon, you still have more margin," van Wijk said.
Those figures describe an operation that would consume only a portion of the gas potential of the North Slope. If the entire 4.5 billion cubic feet a day of North Slope gas, currently envisaged flowing down a North Slope gas pipeline, were instead to be converted into gasoline, it would result in gasoline production of 450,000 barrels a day. Such a massive plant would likely take 15 to 18 years to complete, he said.
The U.S. could reduce its massive oil imports to zero in 10 to 15 years, van Wijk said.