When North Slope (NS) crude oil is produced it is treated to remove sand, water and CO2 that are inappropriate for pipeline shipment. In addition, the natural gas liquids (NGLs) are separated out and some of the butane is injected into the oil pipeline for shipment to the refineries in the south 48, the rest are re-injected back into the formation.
Because a portion of NS crude is bound for California, it must meet California emission standards for vapor volatility. Butane is injected into the NS crude stream to reduce the viscosity of the oil and make it easier to ship. The NS gas treatment plant was sized to be able to separate out enough butane to treat 2 million barrels per day. Now with the throughput reduced to less than 700,000 barrels per day, a good deal of butane, propane, and other gas liquids are re-injected back into the reservoir to maintain the reservoir pressure and/or for sale at a later date. Because there has been no market or use for the propane, virtually all of it has been preserved and re-injected back into the reservoir.
NGLs can be very valuable. They are the feedstock for a multitude of materials like plastics and many synthetics. Why we are not utilizing this state-owned treasure to create industry and jobs in Alaska? Part of the answer is pure industry economics. In North America, it is generally most economical to ship the gas, with included gas liquids, to the end user and then pull off the desired gas fraction and process it into the feedstock required for that plant or industry. To take the gas liquids off anywhere near the oil field would mean the liquids would have to be processed and then shipped some other way as either pellets, a liquid, or pressurized gas. Generally this is not economic.
Now the game in Alaska has changed. There is a pressing need for cheaper energy in the Fairbanks area and all rural communities. The need is so great that Fairbanks is working to truck natural gas north from Cook Inlet and south from Prudhoe Bay. Here is an instate market for natural gas derivatives. The Alaska Natural Gas Development Authority (ANGDA) has been working diligently to get North Slope producers to allow NS vehicles and haul road truckers the use of readily available propane for fuel. Our office and many others have been pushing to get compressed natural gas (CNG) available for the transportation sector in South Central Alaska. CNG and Propane are roughly one-fourth the cost of gasoline or diesel on a per unit energy basis. This is a very viable, yet currently ignored alternative.
So how do we do this? A part of the answer is to build a "straddle plant" along the oil pipeline near Fairbanks and pull a portion of the North Slope oil out of the 48-inch pipe and run it through the straddle plant to pull off the propane (and any other locally useful fraction of the hydrocarbons) and use it to heat the homes in Fairbanks and fuel some of the power generation. This will not only provide cheaper fuel, but will diminish the area's significant winter air pollution problems. An abundant source of propane there would encourage the utilities to build out the residential gas line infrastructure. From the Fairbanks area, and propane could also be barged up and down the rivers and trucked to communities on the road system.
There could also be a side benefit for Alyeska Pipeline Service Company. Alyeska Pipeline Company is designing ways to heat the oil in the pipeline in anticipation of cold oil and low flow pipeline shipping conditions. It is entirely possible that some of the propane extracted from the pipeline at the straddle Plant could be used to heat all, or a portion, of the big pipe's oil throughput.
It is my hope that this solution will be reviewed by our energy experts and stakeholders, and if it is worthy of action, get going.
Buccaneer Energy, a very experienced petroleum company, has recently drilled some productive gas wells on the Kenai Peninsula and is actively considering shipping some of that gas north to Fairbanks as LNG by truck or railcar.
Both of these schemes utilize very mature technologies and are orders of magnitude cheaper than any other solution being discussed. Both plans will probably require the Governor's office to take, at least, a catalyst role in either or both of these options to get them moving forward. These attractive solutions may include incentives, royalty relief or tax reductions to get willing co-operation from the North Slope producers to sell or release some of the propane. We believe there is a "win win" solution available that is economically attractive to both the producers and the people of Alaska.
Fred Dyson represents Eagle River as a Republican in the Alaska Senate and is a former field maintenance superintendent on the North Slope with British Petroleum.
The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch. Alaska Dispatch welcomes a broad range of viewpoints. To submit a piece for consideration, e-mail commentary(at)alaskadispatch.com.