Critical Evaluation of Options for Utilizing Alaska North Slope Natural Gas

Abstract

Abstract The purpose of this study is to develop a mathematical optimization model to provide a critical evaluation of the options available for utilization of Alaska North Slope natural gas. The optimization model is formulated subject to environmental factors of the North Slope, transportation in the arctic, economic considerations and other regulatory constraints. This study identifies natural gas reserves available on the North Slope of Alaska; identifies natural gas markets and several utilization options; and defines production, distribution, and other economic constraints. The options for the North Slope natural gas examined are: enhanced oil recovery (BOR); conversion of natural gas to gasoline, methanol, TAPS compatible liquids, and liquefied natural gas (LNG); transportation of natural gas or its byproducts by pipeline, rail and sea; and other in-state utilization options such as use in utility or industry. A sensitivity analysis is conducted to examine the impact of the constraints on the objective function. Introduction and Background The North Slope of Alaska contains 34 - 39 trillion standard cubic feet of natural gas reserves. An additional 14.6 TCF of gas are estimated to be in the National Petroleum Reserve Alaska (NPRA) with some 31.3 TCF of natural gas reserves estimated in the Arctic National Wildlife Refuge, ANWR (Sharma, et al., 1988). Prior to the completion of the Trans Alaska Pipeline System (TAPS) in 1977, efforts had begun to get Alaska North Slope gas to market. In 1974, the Alaskan Arctic Gas Pipeline Company proposed a 48-inch gas line that would carry up to 4.5 billion standard cubic feet per day (bcfd) across the Arctic Coastal Plain to the Alaska-Canada border where it would join Canadian gas lines carrying the gas to the Lower 48 states. The initial cost estimates for this project ranged from $6.2 to $9.5 billion. Also in 1974, the El Paso Alaska Company proposed the $7.0 billion Trans Alaska Gas Pipeline that would carry gas from Prudhoe Bay field to a tidewater port by a 42-inch pipeline where it would be liquefied and shipped in tankers to the West Coast of the United States (House of Representatives, 1977). In 1976, the Northwest Pipeline Corporation filed an application with the Federal Power Commission (FPC) to build a 42-inch gas pipeline in the existing Alaska Highway corridor. The 1977 Alaska Natural Gas Transportation Act approved this project (The Alaska Natural Gas Transportation System, ANGTS) that would have brought Prudhoe Bay natural gas across Canada to the Central United States. Due to lack of private financing and reluctance of both state and federal governments to finance the project, the Alaskan portion of the proposed line was never built. In 1982, Governor Hammond appointed a committee to explore options for marketing Alaska North Slope gas. The committee's recommendation was to build the $21.5 billion Trans Alaska Gas System (TAGS) which would move Prudhoe Bay gas to a tidewater port through a 36-inch pipeline, liquefy it, and deliver it to Pacific markets (Hickel and Egan, 1983). In June 1987 the State of Alaska, the University of Alaska Fairbanks Petroleum Development Laboratory, and the United States Department of Energy—Office of Fossil Energy sponsored the Alaskan Gas Utilization Workshop. Although the workshop identified several options for utilization of North Slope gas, there was no quantitative evaluation of the proposed utilization options (Proceedings of the Alaskan Gas Utilization Workshop, 1987). In this paper a quantitative analysis of the utilization options for North Slope natural gas is presented. P. 521