Request for Letters of Interest for North Slope Liquefied Natural Gas Plant: Natural gas feedstock source – AIDEA is working with at least two stakeholders that have gas supply contracts to provide natural gas feedstock for producing the liquefied natural gas wholesale commodity.
Alaska LNG can overcome challenges, ExxonMobil executives say
November 21, 2013
Steve Butt, an ExxonMobil executive leading the Alaska LNG team, said his group is working to reduce uncertainties in the project and whittle the cost estimate to the lower end.
"Our role is to get to $45 billion, we don't like $65 billion," he said, adding that natural gas is simply a commodity and that price is key to buyers.
Butt noted that the team he leads represents the first time that all three major North Slope producers — ExxonMobil, ConocoPhillips and BP — have worked together with an experienced northern pipeline operator, TransCanada, on a project to move North Slope gas to market in the four decades since the Prudhoe Bay oil and gas discovery.
Butt described for the audience of several hundred people — mostly Alaskan business people and policy makers — the details of the LNG project as defined in its early stages: • Produce about 3.5 billion cubic feet of gas a day from the Prudhoe Bay and Point Thomson fields. • A massive gas treatment plant to cleanse the gas of about 400 million to 500 million cubic feet a day of carbon dioxide. The treatment towers will be 120-feet tall and 28-feet wide, with 1-foot-thick steel walls to contain the high pressures of treatment. About 12 percent of Prudhoe's gas is CO2. • An 800-mile, 42-inch diameter buried pipeline, with eight compressor stations to move the gas and keep it chilled. Among the challenges will be operating a buried chilled-gas pipeline without disturbing discontinuous permafrost where the soils are alternately frozen and unfrozen, traversing the narrow and steep Atigun Pass in the Brooks Range, and spanning the Yukon River. Crossing the Susitna River and crossing Cook Inlet in Southcentral Alaska to reach the LNG plant on the Kenai Peninsula will be easier tasks, Butt said. • The plant at Nikiski, featuring three liquefaction trains — or manufacturing lines — LNG storage tanks and two tanker berths on Cook Inlet than could accommodate a ship every two days on average. The team continues to study the ice and strong tides on Cook Inlet and "we have a lot of confidence we can make this work," Butt said.
On a November morning just outside Tuktoyaktuk, diesel engines break the silence as trucks and graders trundle back and forth, slowly pushing their way across the tundra toward Inuvik, about 140 kilometres south.
With the sun barely rising above the horizon on the northernmost reaches of Canada’s mainland, the crew is constructing a winding road that will provide the first year-round link between the Arctic Ocean and the rest of the country. It is a remarkable piece of engineering that is like laying a thick carpet across a giant frozen sponge.
The Inuvik-Tuktoyaktuk gravel highway, a dream that goes back to the 1950s, will take about three years to complete, with most of the work being done in the long, bone-chilling winter. Northern residents, governments and aboriginal leaders are looking to it as a path to a brighter economic future following decades of high hopes and bitter disappointments.
Those have included an energy exploration boom in the 1970s, which ended when oil prices tumbled in the following decade, and on-again, off-again plans for a multibillion-dollar Mackenzie Valley natural gas pipeline. They appear to be off again. The $300-million road project, which will employ about 250 people at its peak, is smaller in scale than either of those and the people of the North are counting on short and long-term benefits.
“What this road means to this region is a whole new opportunity,” said Merven Gruben, mayor of the hamlet of Tuktoyaktuk, home to about 900 people on the Beaufort Sea coast.
“We know it’s going to be a road to resources for industry, but it’s also a road for us to travel any time we want to go for holidays – just drive out. But the big picture, I think, is the cost of living going down for our people. Everybody’s going to be affected by that. In the stores everything’s so expensive right now because you have to fly everything in,” Mr. Gruben said in his office above the town council chamber.
Indeed, everything is costly in the place locals call Tuk, a collection of modest wood homes with few stores and no restaurants or hotels – a two-litre carton of milk runs about $9 and gasoline is $1.85 per litre. Travel between Inuvik, a regional government and supply centre, and Tuk is restricted to air in the summer and ice road in the winter, making it tough and often pricey for residents, tourists and industry to move back and forth.
There are still remnants of the last oil boom in Tuk, including worker housing built for Beaufort Sea drilling operations by Dome Petroleum and other firms. They have been taken over by local companies, including the one owned by Mr. Gruben’s family that is in charge of building the highway.
Construction is just getting under way on the Inuvik side, on a stretch of the town’s Navy Road, which until recently was lined with drilling rigs and other heavy equipment stored in anticipation of a new energy rush fueled by the Mackenzie gas project. Depressed natural gas prices and ample supplies closer to major markets have prompted lead partner Imperial Oil Ltd. to put that on hold.
This fall, Imperial began the regulatory process for a potential drilling program on its acreage in the Beaufort Sea, along with partners Exxon Mobil Corp. and BP PLC. Drilling may not start until the end of the decade, but the all-weather road will be a boon when operations start.
The highway is not being constructed just for industry.
According to a report prepared for the government of the Northwest Territories, it is expected to cut the overall cost of living in Tuk by $1.5-million a year and boost the gross domestic product of the region by $330,000.
Tourism spending, meanwhile, is projected to increase by $2.7-million per year, as travellers with a taste for the North’s romanticism will come to “dip their toe in the Arctic Ocean,” as locals are fond of saying.
Mr. Gruben, along with other leaders in the region, including Nellie Cournoyea, CEO of the native-owned Inuvialuit Regional Corp. and a former NWT premier, and MLA Jackie Jacobson, had pushed for the link for years. They say they helped to convince Prime Minister Stephen Harper that it would not only offer big economic benefits, but also contribute to Ottawa’s push for Arctic sovereignty. Ottawa is funding $200-million of the $300-million total cost.
The road requires special construction methods aimed at protecting the all-important permafrost that will give it stability all year. This is key with climate change already bringing risks to the all-important frozen layer. Crews find a nearby gravel source which they unlock by drilling and blasting, then haul in enough to lift the road 1.8 metres above grade level.
“The whole design is so that the bottom layer of the gravel will not melt into the tundra, so the bottom core will stay frozen,” said Russell Newmark, CEO of E. Grubens Transport Ltd., the project’s contractor.
In conventional road construction, dips in the landscape can be filled and bumps shaved by heavy equipment, something that can’t be done for a thoroughfare across the fragile permafrost, Mr. Newmark said.
“It’s a totally different methodology for building a road,” he said.
For industries such as energy and construction, the highway will lower costs in a region that has always meant expensive and tricky logistics, said Floyd Roland, mayor of Inuvik, a town of 3,500 people. Mr. Roland is also a former NWT premier.
“What would normally take you a year in Alberta, would take you three years up here because you’ve got three months of winter road to work with. So, you’ve got to spend money up front and then your product sits there waiting for the season so you can get it up and build it,” Mr. Roland said.
Mr. Gruben said the link represents the first stage of growth for his town as it becomes a destination for both industry and tourism. “In five or six years it will definitely be a bigger community. I’ve always said that some day we’ll be as big as Inuvik, and maybe even some day as big as Yellowknife,” he said. “All the stuff has come together at the perfect time. You have the offshore, you have the oil and gas exploration, you have sovereignty.”
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