Funny you should mention that.This was all over the local news yesterday.
Nikiski plant scores success converting gas to liquid
BREAKTHROUGHS: But BP claims pipeline is still best way to move fuel Outside.
By WESLEY LOY Anchorage Daily News
(Published: December 12, 2003)
A Nikiski test plant is making breakthrough advances in economically converting natural gas into liquid form, a technique that could bring vast quantities of so-called stranded gas to market around the globe, a BP engineer said Thursday.
As for using the technology for North Slope gas, however, the engineer and a BP executive said flatly: Forget about it.
That agitated one state lawmaker and others who questioned BP's motives in erecting the Nikiski plant.
Speaking at a breakfast meeting of contractors who serve the oil industry, BP engineer Steve Fortune and Ken Konrad, vice president for Alaska gas development, said the London-based company believes a conventional gas pipeline across Canada to the Midwest is a better option than a large gas-to-liquids plant on the Slope.
It's a better idea, they said, even though liquid gas could flow down the existing 800-mile trans-Alaska oil pipeline to the tanker dock at Valdez.
And Konrad believes a gas pipeline, an economic holy grail Alaskans have been chasing for decades, is nearly at hand.
"My assessment is we're closer than we've ever been," Konrad said after BP's presentation Thursday at the Petroleum Club in Anchorage.
BP spent $86 million to construct a chemical plant at Nikiski to hone technology for turning gas into a liquid that stays fluid without the aid of pressure or supercooling. The process dates to before World War II and is expensive, but BP and several other major oil companies have recently made advances as global gas demand has intensified.
Recently, two oil companies announced plans to build large gas-to-liquid plants in Qatar, a gas-blessed Middle East state. Shell in October signed a deal for a $5 billion plant capable of making 140,000 barrels per day of GTL products. And four days ago, Conoco Phillips, which like BP holds rights to a big slice of the North Slope gas, announced a similar GTL project in Qatar.
BP began operating its Nikiski test plant in July, making about 300 barrels a day. Using compact and secret components, it has shaved a big part of the cost off the GTL conversion, said Fortune, who helped design the plant.
"We're actually delighted with the technology," he said. "It's working really well."
BP and a partner plan to use what they've learned from the Nikiski plant to develop or license $1 billion plants for making 30,000 barrels a day of synthetic crude oil good for making clean-burning diesel and other refined products.
But no such plant is planned for the North Slope, where giant streams of natural gas that come out of the ground with oil are injected back into the ground for storage for lack of a way to get it to market.
Hopes for marketing North Slope gas have flared up for more than 25 years, and the flame is burning hot again now. The oil companies have gone to Congress seeking tax breaks and loan guarantees for the pipeline to the Midwest. And Gov. Frank Murkowski has called for the North Slope producers to come forward and negotiate tax and royalty rates for that project.
Konrad on Thursday said BP has studied all the options for bringing the Slope's estimated 35 trillion cubic feet of gas to market, and the best is building a pipeline to the Lower 48.
It's not simply a matter of finding the least expensive way to transport the gas, he said. It's got to be profitable enough, Konrad said.
Better places for GTL, he said, are countries like Bolivia, which has lots of natural gas next to a thirsty market for diesel that could be made from the gas.
"The stranded gas is right there, and the market is right next to it," Konrad said. That's not the situation in Alaska, he said, which has abundant gas but relatively small local demand.
Other impediments to doing GTL on the Slope include the problem of keeping the relatively clean liquid gas from mixing with crude oil as it moves down the trans-Alaska pipeline, Konrad said.
BP representatives have consistently said the Nikiski plant was not intended as a prelude for a much larger plant on the North Slope.
Yet it seems "a little bit bizarre" that BP would have built the test plant if it didn't intend to try GTL on the Slope, said Tom Marshall, who heard BP's talk Thursday. Marshall is a former chief petroleum geologist for the state and the man credited with spotting the oil potential of Prudhoe Bay in the early 1960s.
State Rep. Eric Croft, an Anchorage Democrat who has long questioned why oil companies including BP, Conoco and Exxon Mobil have taken so long to move Alaska gas to market, said he figured the Nikiski plant was nothing more than a delaying tactic.
BP and other oil companies are too busy developing their holdings elsewhere in the world while sitting on North Slope resources, said Croft, who had expected BP to announce that its GTL plant was a bust.
"It's almost more insulting to say it works really well but we're not going to do it here," he said.