Energy

Here’s the $10 billion reason for the high cost of Alaska LNG

The Alaska LNG megaproject has a $10 billion problem other gas projects don't face — a huge volume of carbon dioxide must be prevented from entering the atmosphere where it may speed up global warming.

The senior manager for the project, an employee of the lead oil company, ExxonMobil, said there is no federal law requiring that all carbon dioxide — a major greenhouse gas — be captured and controlled, like being injected back, deep into the ground.

But Steve Butt said the project's partners — Exxon, ConocoPhillips, BP and the state of Alaska — will never support venting 400 million to 500 million cubic feet of carbon dioxide into the air daily.

That's an "astronomical" amount, he said, about double the volume of natural gas used in Alaska each day.

"As a percent of the world's total CO2 emissions, it moves the needle and we don't want that," he said. "We want this project to be environmentally responsible. We know Alaska is a pretty special ecosystem."

Others who have closely watched the state's decadeslong efforts to produce natural gas from the North Slope and ship it to markets Outside say there are other reasons the carbon dioxide needs to be put back underground once it's removed from the natural gas.

They say doing so can continue maximum production of the valuable oil in Prudhoe Bay, in part by keeping up pressure in the reservoir. For decades, that's the role natural gas has played each day in the giant oil field.

Also, regulatory authorities would have a problem with a greenhouse-gas producing project in a world where warming is a mounting global concern. Natural gas has been touted by Alaskans as a more environmentally friendly fuel than coal or oil, lending urgency to the control of emissions of the naturally occurring, but deeply buried, carbon dioxide.

"I can't imagine regulators would ever say, 'Yes, we accept that,'" said Bill White, a former researcher with the now-shuttered federal gas pipeline coordinator's office.

Greenhouse gases act like the glass of a greenhouse — they let solar energy in, but block heat-producing infrared light from escaping into space.

The 4-year-old Alaska LNG project was initially estimated to cost $45 billion to $65 billion. Production isn't expected to begin until 2025 even if the project is approved and built. With oil prices hurting their bottom line and low liquefied natural gas prices hurting their ability to invest, the oil partners are increasingly concerned about moving ahead with the costly effort.

Butt said engineers have managed to reduce the project's cost estimate toward the $45 billion end of the range.

The plant to remove the carbon dioxide represents about one-fourth of that cost, he said.

"It's about $10 billion at the low end," he said.

Carbon dioxide makes up about 12 percent of the gas at Prudhoe Bay, making it one of the highest concentrations for an LNG project in the world, said Butt.

"It's trillions of cans of Coca-Cola every day," he said.

The gas treatment plant would be built on the Slope. Butt said the plant would essentially be a "giant CO2 recovery system," removing the carbon dioxide before the gas is shipped in an 800-mile pipeline to Nikiski.

He called it one of the project's most "challenging and costly elements."

The plant to remove that carbon dioxide will be more than 100 feet tall, Butt said. That's taller than many buildings in downtown Anchorage.

The amount of carbon dioxide is a problem for a project seeking to compete with numerous other LNG projects around the world, said White.

"A lot of projects don't have this $10 billion problem," White said. "None of the Lower 48 projects proposed and under construction have that issue, including the one that has started up (at Sabine Pass in Louisiana)."

Natural gas buyers want methane in their product, not carbon dioxide because it doesn't burn, he said.

"It just takes up space" and adds no value in furnaces and turbines, he said.

The only Slope gas export project to receive a final environmental impact statement from the Federal Energy Regulatory Commission — a milestone the Alaska LNG project has advanced toward — initially proposed getting rid of the carbon dioxide by venting it into the air, said White.

But that concept was introduced in the first half of the 1980s, when climate change wasn't the issue it is today. The organizers of that project, Yukon Pacific Corp.'s Trans-Alaska Gasline System, quickly switched gears and rejected the idea, said White.

Jeff Lowenfels, a former president of Yukon Pacific, said the company planned to buy "LNG quality" gas from the Prudhoe Bay oil producers, with the carbon dioxide already removed and reinjected back into the ground.

That project's estimated cost was about $14 billion, he said. But that project died because oil companies wouldn't make the gas they owned available, he said.

Rising costs and falling gas prices have also been blamed for dooming that project, the same factors that over the decades have killed other efforts to market Slope gas.

Editor's note: Jeff Lowenfels is also a weekly gardening columnist with Alaska Dispatch News.

 

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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