The question of how to increase throughput in the Trans-Alaska Pipeline System (TAPS) has recently dominated the conversation across the state. I believe we should take a closer look at building a gas to liquids (GTL) plant on the North Slope to help solve this problem.
GTL plants convert natural gas into high-quality refined petrochemicals that sell for a premium, like ultra-clean jet fuel, diesel and propane. This is done through a chemical process developed prior to World War II that is currently being used in places like Qatar, South Africa and Malaysia. From .8 billion cubic feet of natural gas a day, a fraction of what a potential big gas pipeline would deliver to Valdez or Alberta, a GTL plant could produce more than 100,000 barrels of liquid petroleum product.
These premium petroleum products could be shipped down TAPS, either in batches or mixed in with the crude to increase its value and volume. With another 100,000-plus barrels of petrochemicals flowing through the pipeline each day, a GTL plant would lower tariffs and extend the life of TAPS. A GTL plant would also lead to new exploration on the North Slope once oil companies know they will be able to sell the gas, which would likely lead to the discovery of new oil fields.
With low natural gas prices and skyrocketing oil prices projected into the foreseeable future, a GTL plant looks better than ever. According to the state Department of Revenue, even with a very high estimate for construction costs, at today's oil prices the internal rate of return for a GTL plant on the North Slope would be more than 12 percent. With more realistic cost estimates, the return hits 15 percent. With returns like this, a GTL plant on the North Slope merits consideration. And this state report assumes that the GTL plant will only be 60 percent efficient, whereas modern GTL plants can achieve up to 90 percent efficiency. A GTL plant on the North Slope could generate 300 megawatts of energy from the "waste" heat, which would provide a source of low-cost energy, plus millions of gallons of pure water that could be used either for drinking or for building ice roads.
Finished products from GTL plants are highly desirable. The Department of Revenue estimates that consumers will pay 30 percent more for GTL petroleum products than for North Slope crude This is because the products are already refined and virtually free of sulfur and other impurities. GTL plants also separate CO2 during the conversion process, which can be used to produce more oil and keep greenhouse gases out of the atmosphere through enhanced oil recovery.
Building a GTL plant on the North Slope would not prevent us from pursuing other natural gas projects. Since a GTL plant on the North Slope that produces more than 100,000 barrels of petroleum products a day would only use .8 BCF of natural gas a day, there would still be plenty of gas left for an in-state gas pipeline, or even a larger line to Alberta or Valdez for export.
Sen. Lesil McGuire (R-Anchorage), Sen. Tom Wagoner (R-Kenai) and I introduced Senate Bill 109, which lowers construction costs for companies looking to build a GTL plant on the North Slope. Construction of a GTL plant would create hundreds of new full-time construction and operations jobs on the North Slope and provide billions in revenue to the state and oil companies.
A GTL plant on the North Slope is a win/win/win solution. Oil and gas producers could finally monetize their natural gas reserves, while using the carbon dioxide to help bring even more oil into TAPS. The addition of 100,000-plus barrels per day into TAPS would lower tariffs and extend the life of the pipeline. Most important, Alaskans would have greater fiscal security and stability.
It's time for Alaskans to think big. We have the opportunity to take our destiny into our hands. Gas to liquids could be a key that helps keep oil flowing through TAPS for the next 40 years.
Sen. Bill Wielechowski, D-Anchorage, is vice chair of the Senate Resources Committee.
By SEN. BILL WIELECHOWSKI