Anchorage Daily News

Second of three parts

NIKISKI -- Tucked back on a wooded tract, with volcanic Mount Redoubt looming across nearby Cook Inlet, a naked steel frame rises eight stories into the chill air. It's jam-packed with gleaming pipes, valves and cylinders.

And secrets -- industrial secrets that engineers at oil giant BP hope will erupt someday into a breakthrough for extracting rich troves of natural gas from the world's most remote corners -- the jungles, the African bush and, just maybe, the Arctic.

"It's a big chemical plant is what it is," says Len Seymour, a BP manager. "Everybody's excited. We've got great people out here to test this technology."

The goal of the $86 million plant is to figure out how to cheaply turn natural gas into a liquid. Solving that problem could finally liberate a mother lode of natural gas from the North Slope.

The company hopes to crank up its test plant in the next two months.

In fact, the know-how to do such a conversion has been around for decades, dating back to Hitler's Germany. But nobody has yet figured out how to do it cheaply and on a large scale.

Many think that's about to change. BP and other major oil companies including Chevron Texaco, Shell, Exxon Mobil and Conoco Phillips all are taking an interest in so-called gas-to-liquids (GTL) technology. Smaller companies, university scholars and the U.S. Department of Energy also are chasing the idea.

A double prize is up for grabs. The first is a new way to get so-called stranded gas to market, gas that might otherwise remain stuck in the ground for lack of a practical way to transport it. The second is the wide range of clean, sulfur-free goods that can be made from GTL, including diesel and naphtha, a raw material for making gasoline.

"The future is very, very bright with this technology," says Godwin Chukwu, a University of Alaska Fairbanks petroleum engineering professor and GTL expert.

Chukwu has lectured and published extensively on one of the most exciting prospects for GTL technology -- turning the vast and stranded gas reserves on the North Slope into a liquid form that could slide easily down the 800-mile trans-Alaska oil pipeline.

Doing that would eliminate the biggest impediment to Alaska's dream of bringing that gas to market -- the need for another long, multibillion-dollar pipeline designed to carry it in a gaseous state.

Alaska is hardly unique in its situation.

"There are trillions of cubic feet of natural gas throughout the world, isolated from traditional gas infrastructure and thus considered geographically too distant for economic development," according to Chukwu.

BP'S NIKISKI EXPERIMENT

"This is fantastic," says Steve Fortune, a BP engineer, on a recent walk around the Nikiski plant. "It's very rare as an engineer to see it through from scale to design to operation."

Fortune, 33, an England native now living in Anchorage, has spent six years of his young career on the GTL problem. He helped to design this plant in the woods and to persuade the company brass to build it. With a couple of patents to his credit, he says flatly: "I'm confident this will work."

The basic means of turning gas to liquid, known as the Fischer-Tropsch process, was developed in 1923 by German researchers Franz Fischer and Hans Tropsch. The Nazis used the process for their war effort after being cut off from oil supplies in Romania and the Caspian Sea region, and later South Africa became a leader in GTL technology due to an apartheid-inspired international oil embargo to that country.

Here's a simplified recipe: Take raw natural gas, or methane, and combine with steam in a reformer or reactor to produce what's known as syngas. Run that through a Fischer-Tropsch converter, which contains a secret catalyst, to produce long carbon molecules of molten wax. Add hydrogen atoms in a hydrocracker, and voila! You have syncrude, otherwise known as white crude. It's clear like water, needs no special cooling or pressure to remain a liquid, and can flow down an ordinary oil pipeline to market.

Best of all, syncrude is marvelously clean, free of sulfur, nitrogen, nickel, salt and other undesirables. It potentially could be worth $5 more per barrel than crude oil, the Energy Department says.

The Nikiski plant, once operating, each day will take in 3 million cubic feet of Cook Inlet natural gas through a 20-inch Marathon pipeline and will convert it to 300 barrels of syncrude, which will then be hauled to the Tesoro refinery located conveniently just up the Kenai Spur Highway.

The BP plant will employ about 20 people, and BP is partnering in the experiment with a London-based, Russian-owned company called Davy Process Technology.

The plan is to run the GTL plant only 18 months or less, gather as much experience and operating data as possible, then tear it down, says Dave MacDowell, gas spokesman for BP Exploration (Alaska) Inc.

The goal is to greatly boost the efficiency of GTL technology to reduce the substantial loss of gas in the process and also cut the size and cost of such plants.

This is where the BP engineers get tight-lipped, but generally the Nikiski plant has two secret components. First, the reformer -- it looks like a big, blue dumbbell turned on end -- is very compact yet powerful. If a normal reformer is the size of a house, BP's is an outhouse using far less energy. About 60 percent of the cost of GTL plants is in this first step, Chukwu says.

Next, the catalyst inside the Fischer-Tropsch converter is new and improved, the engineers say.

If successful, this test plant could lead to far larger, commercial GTL plants capable of making 300,000 barrels a day of syncrude or even more.

A little more information is known about BP's approach. Its compact reformer, that dumbbell thing, can cut the capital costs of making syngas by 50 percent, and the company has developed a new cobalt-based catalyst, according to a report in late 1999 from the Oak Ridge National Laboratory in Tennessee.

A HOT RACE

Other big oil companies, "a lot of them," are racing to perfect their own GTL secrets, Chukwu says.

He recently attended major international GTL conferences in London and in Nigeria, his home country, and he and graduate students at UAF have an $849,000 grant from the Department of Energy for GTL research.

The reason for the race is the potential market value of the world's remote, stranded gas assets. Very often, this gas is in the vicinity of existing oil pipelines but is left in the ground for lack of a way to move the gas to market.

If all this gas could be converted economically to a liquid, it could flow through those oil pipelines. The trans-Alaska oil pipeline would need very little modification to accommodate GTL, Chukwu says.

Chiefly, only some new storage tanks at Valdez would be needed, he says. The GTL could simply be blended in with the oil or, better, it could be sent down in discrete slugs or batches.

"This is a big deal if it happens," says Dale Nesbitt, an energy consultant in Los Altos, Calif. "There's huge, just absolutely phenomenal, reserves of stranded gas around the world. It's ridiculous how much gas they have in the former Soviet Union with no market."

So far, there are no large, commercial GTL plants in the world.

Among GTL aspirants, Conoco Phillips plans to build a $75 million test plant at Ponca City, Okla.

Exxon Mobil ran a pilot GTL plant in Baton Rouge, La., in the early 1990s and has proposed building a plant to make as much as 100,000 barrels a day of syncrude in the Persian Gulf emirate of Qatar, which has a staggering 509 trillion cubic feet of gas, second in the world only to Russia and Iran and far greater than the North Slope's 35 trillion cubic feet.

South African refiner Sasol and Chevron Texaco in 1999 signed a global GTL joint venture to develop technology "so promising that its development could create an entire paradigm shift throughout the petroleum industry," the companies said at the time. Their ideas include a large GTL plant in Nigeria.

Shell operated a GTL plant in Bintulu, Malaysia, from 1993 to 1997, when a Christmas Day explosion closed it down.

Some GTL plans, however, have not panned out. Syntroleum Corp. of Tulsa, Okla., last year suspended plans for an 11,500-barrel GTL project in western Australia as part of company cost cutting.

White crude, white nights?

The Nikiski plant does not -- repeat, does not -- mean BP is aiming to build a large GTL plant on the North Slope, company spokesman MacDowell says.

BP continues to support building a pipeline down the Alaska Highway and across Canada as the best way to bring North Slope gas to market, he says.

Other factors also could delay GTL. Oil prices must stay high enough to justify the costs of converting gas to a liquid. A November 2001 study from the Baker Institute at Rice University said the breakpoint for GTL profitability is $15 to $20 a barrel, with BP regarding $20 as the minimum profitability threshold. That's higher than the historic price of oil but lower than the price for the last three years.

Another question is whether it's smart, just now, to start converting gas to liquid. The reason is that much gas is needed on the North Slope to flush out more oil from porous rock in Prudhoe Bay, Kuparuk and other fields. If major gas sales began in 2005, some 400 million barrels of oil could be stranded, the Energy Department says.

The smartest course is to ramp up GTL production slowly over several years so engineers could take advantage of a "learning curve" in perfecting the process, according to the department.

Fortune, the young BP engineer, says he just wants to turn on the Nikiski experiment and start collecting knowledge. Via the Internet, experts around the world will be able to view the plant's operation screens just like the operators on-site.

Sure, this plant soon will be dismantled and Fortune will, in effect, be out of a job. That's fine by him.

"If anything, we're getting more job security. A bigger and better opportunity is what we're working for," he says.

Reporter Wesley Loy can be reached at wloy@adn.com or 907-257-4590.