Mayor energy tf 100610 - Heinze & Popp Presentation

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Heinze & Popp presentation to Mayor Dan Sullivan's Energy Task Force

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Mayor energy tf 100610 - Heinze & Popp Presentation

  1. 1. In- In-State Natural Gas & Value Added Manufacturing Mayor Sullivan’s Energy Task Force October 6, 2010 – Anchorage Harold Heinze (ANGDA) & Bill Popp (AEDC)
  2. 2. North Slope Gas To Market
  3. 3. Projects For Delivery of North Slope Natural Gas Inside Alaska Spur Gas Pipeline Off Large Inter-State Gasline TransCanada & ExxonMobil - APP ConocoPhillips & BP – Denali Bullet Line -- NS To Cook Inlet ASAP – Alaska Stand Alone Gas Pipeline Project Alaska Gasline Development Corp (AGDC) & HB 369 All-Alaska Gas Pipeline -- NS To Valdez Alaska Gasline Port Authority (AGPA) Fairbanks Pipeline Company (FPC) -- NS To Fox Trucking LNG and/or Propane From The NS
  4. 4. Large Diameter Gas Pipeline •48-inch diameter •X80 grade steel •734 miles to border •6 compressor stations •4.5 BCFPD capacity •Max 6 BCFPD •Operates at 2500 psi Denali–Alaska Gas Pipeline & Alaska Pipeline Project Have Similar Designs $35 B Price Tag
  5. 5. The “Open Season” Process Sealed bid auction of volumetric shipping capacity in gas pipeline Tariff to delivery points known - cost estimate Shipper makes a firm multi-year commitment in a “ship or pay” contract Creditworthiness of shippers is essential since committed capacity is the basis of design APP closed 07/30/10 & Denali closed 10/04/10 Results of process are public & regulators hear complaints before certification of the project
  6. 6. 30 % Discount on Shipping Rates “Negotiated Rates” Not Available In Future Offerings
  7. 7. In- In-State Natural Gas Demand Cook Inlet Electric Power Generation = 100 mmscfpd Home Heating (ENSTAR) = 100 mmscfpd average Kenai LNG Plant Export = mmscfpd Potential Gas Value-Added Manufacturing = ?? Interior Golden Valley Electric = 20 mmscfpd FNG & Doyon Military Utilities = 5 mmscfpd Flint Hills Oil Refinery = 25 mmscfpd Mining Operations = mmscfpd
  8. 8. ANGDA Spur Line Project
  9. 9. Spur Line 300 miles of 20- to 24-inch high pressure (2500 psi) X-80 pipeline connecting Delta Junction to Palmer Conditional right-of-way for Glennallen to Palmer (150 miles across State land) issued to ANGDA in 2008 Natural Gas Supply Company (NGSC) is a gas supply cooperative of Homer to Fairbanks electric utilities and ANGDA-aggregated short and longer term gas needs ANGDA bid on behalf of NGSC members for capacity in APP open season that closed on July 30, 2010, and Denali open season that closed on Oct 4
  10. 10. Bullet Line Direct To Cook Inlet •800 miles of 24-inch X80 pipe •Includes CO2 removal & NGL handling facilities •Cost estimate $6B to $11B •HB 369 set up Alaska Gasline Development Corp (AHFC) •EIS for ASAP project underway •Project execution plan to Legislature by July 2011 •GTL, LNG, & NGL projects being studied separately
  11. 11. Bullet Line To Cook Inlet 800 miles of 24-inch X-80 pipeline direct from Prudhoe Bay to ENSTAR 20-inch line around Cook Inlet Includes CO2 removal and potential NGL handling facilities HB 369 formed Alaska Gasline Development Corp (AGDC) as a subsidiary of AHFC to continue work of the Alaska Stand Alone Pipeline (ASAP) Screening cost estimates completed ($6 B to $11 B) and EIS document in the drafting phase Project execution plan to Legislature by July 1, 2011 RFP on GTL awarded to Hatch with LNG RFP just issued
  12. 12. Port Authority – Valdez LNG 800 miles of large-diameter gas pipeline from NS to Valdez paralleling and in proximity to TAPS oil line All-Alaska, All-American gasline based on “updated” Yukon Pacific right-of-way alignment, Bechtel design, completed EIS, and Export License Major sponsors are Fairbanks & Valdez supported by Bechtel, Sempra, Mitsubishi & Mitsui Review of Valdez LNG facility design is underway Pipeline to Valdez included in current TransCanada AGIA work (APP)
  13. 13. Interior Gasline From NS Energia Cura announced a non-binding open season in late August 2010, to close on October 1, 2010 Fairbanks Pipeline Company project is a 10-inch pipeline from Prudhoe Bay to Fox Secondary transmission network of 5-inch high- pressure, steel-coiled flow lines emanating from Fox terminus Currently seeking nominations of volume & delivery locations along the corridor extending to Eielson AFB Few details released in support of $500 million cost
  14. 14. Trucking LNG From North Slope In early 2008 Fairbanks Natural Gas (FNG) proposed constructing a 25 mmscfpd LNG plant at Prudhoe Bay, with the LNG to be trucked to Fairbanks utilities with Golden Valley Electric (GVEA) as anchor gas user Interior Alaska uses fuel oil and distillate at a comparative cost over $20/mmbtu ExxonMobil will be providing the feed gas under contract (not publicly filed) The Alaska Gasline Port Authority (AGPA) has made a deal to acquire FNG for $64 million and is currently arranging a $250 million financing for LNG plant, storage, & trucks
  15. 15. In- In-State Gas Pipeline Projects Cost Flowrate Tariff ($ million) (mmscfpd) ($/mmbtu) Mainline In Alaska 22,600 4,500 1.88 Spur Line Delta Junction 1,500 250 3.50 Glennallen 750 250 1.75 Bullet Line 6,400 250 14.70 Mainline To Valdez Pipe To Valdez 22,300 3,000 2.56 LNG Plant 10,000 2,750 NS To Fairbanks 500 33 9.00 Truck LNG 250 25 6.00 Mainline to Alberta 36,000 4,500 2.78 Includes Gas Conditioning --- US $ in 2009
  16. 16. Project Comparison Overview The “gas conditioning” facility to reduce CO2 to meet pipeline specifications is very expensive (40- to 50-% of the total project cost) and sets the critical path timeline Mainline proposals have very low tariffs because of economies of scale and sponsors offering incentives to anchor shippers (approximately 30% discount) NS gas is rich in NGL’s and offer a major In-State opportunity for manufacturing C2 Ethane 7.2% 200,000 bpd C3 Propane 3.7% 100,000 bpd C4 Butane 0.7% 25,000 bpd Gas value-added manufacturing plants cost several $B and the investment decision would have to be made simultaneous to a gas supply pipeline sanction decision
  17. 17. In- In-State Gas Delivery Costs Cost of Service To Deliver NS Gas Fairbanks Valdez Cook Inlet ($/mmbtu) ($/mmbtu) ($/mmbtu) Mainline To Alberta 1.65 Spur Off At Delta Junction 5.15 5.15 Bullet Line To Cook Inlet 12.00 14.70 Mainline To Valdez LNG 2.40 2.58 Spur Off At Glennallen 4.15 Small Line - NS To Fairbanks 9.00 Truck LNG From NS 6.00 Tariff From NS to Alberta = $ 2.78 /mmbtu Includes Gas Conditioning --- US $ in 2009
  18. 18. Project Links on the Web www.angda.state.ak.us Denali – the Alaska Gas Pipeline Alaska Pipeline Project www.denalipipeline.com www.thealaskapipelineproject.com Alaska Gasline Port Authority Alaska Gasline Development Corporation www.allalaskagasline.com www.gasline.us Fairbanks Natural Gas Energia Cura www.fngas.com www.energiacura.com
  19. 19. North Slope Propane Distribution ANGDA has proposed the construction of a propane separation facility and wholesale propane outlet on the North Slope A 2,000 bpd (propane) facility to process Prudhoe Bay residual re-injection gas is estimated to cost in excess of $200 million Propane distribution from the North Slope would involve trucking & barging (including use of iso-containers) to service rural, river, and maritime communities and industrial plants Prudhoe Bay Unit owners are considering modifications to existing facilities for additional propane recovery
  20. 20. ISO-Container Propane Tank
  21. 21. LPG’s & NGL’s in North Slope Pipeline North Slope Gas Pipeline Flow --- 4.5 BCFPD Thousand Mole Component Bbls/Day Tonnes Per Percent Year C2 Ethane 7.23 206,000 4,250 C3 Propane 3.76 110,250 3,250 C4 Butane 0.76 26,250 900 C5+ Pentanes 0.03 1,250 45 Composition Based on ANGTS – Alaska ROW Application (June 1, 2004) – Page 9 of 34
  22. 22. Alaska Gas & NGL Potential Uses NH3/Urea Plant Dry Gas LNG Plant Export (Methane) GTL Plant In-State Enstar LDC Use Ethane Ethylene Plant Polyethylene Export Plants In-State Use Propane Propane Tank Farm Export Butane Tank Butanes Farm
  23. 23. Value Added Manufacturing Acceptable Gas Prices in Constant $ 10 Maximum Gas Price $/MMBtu 9 Japan 8 LNG 7 6 Market Prices in South Central Alaska (2015-2035) PetroChem (Ethane) 5 GTL to Japan LPG (Propane) 4 West 3 Fertilizer GTL Coast 2 LNG 1 0 100 200 300 400 500 600 700 800 900 1000 Quantity MMcfd
  24. 24. Alaska Gas & NGL Potential Uses Source Separation Product Use NGL Separator Plant : NH3/Urea Plant 1) “Raw” stream Dry Gas LNG Plant Export Spur Pipeline (Methane) with GTL Plant? 2) NGL 2) Methane North Slope Natural Gas In-State Enstar Pipeline Use 3) De-ethanizer 4) De-propaneizer Polyethylene Export (& MEG) Plants 5) De-butaninzer Ethane Ethylene Plant In-State Propane Tank Use Propane Farm Butane Tank Export Butanes Farm Pentane Tank Local Pentane Farm Refinery
  25. 25. Petrochemical Critical Success Factors Every Petrochemical Project Needs: Low Cost of Production Driven by availability & cost of feedstocks & energy Low Logistics Costs for RM’s & Finished Products Proximity to feedstocks and end use markets Infrastructure availability and quality Low Capital Investment Versus Other Locations includes site & logistics capital Channel to Market (Commercial Strengths) Good, Stable Investment Climate Taxes, cycle timing, regulations, incentives, etc.
  26. 26. Alaskan Natural Gas & Ethane Prices Natural Gas price in Alberta is North Slope Prices: NG = $5.51 usually lower than the Chicago Ethane = $6.01 price, based on the cost of Differential to USGC pipeline shipment, since Site comparison Table here NG = (- $2.57) Alberta is long on gas, (as is the Ethane = (-$5.83) US Gulf Coast). North Slope gas and ethane will be priced based on their netback after pipeline Cook Inlet Prices: shipments to Alberta while NG = $6.81 Alberta Prices: Cook Inlet prices will be the Ethane = $7.31 NG = $7.06 North Slope price plus tariff. Differential vs USGC Ethane = $7.56 Ethane prices in Alberta are NG = (- $1.17) Differential to USGC Ethane = (-$4.53) based on its BTU value in its NG = (- $0.92) Ethane = (-$4.28) only alternative use, as natural gas shipped to the US. Chicago Price: However, US ethane has to NG = $7.92 compete against crude oil NG Diff to USGC = (- $0.06) based cracker feedstocks on the USGC, so its price is higher than its BTU value there when crude oil is high relative to gas (as it is now). Ethane at Cook Inlet will have a greater discount to the USGC than natural gas will. Note: The 2018 prices and differentials to the USGC shown here are in Constant USGC Prices: 2009 $/ MMBTU. NG = $7.98 Ethane = $11.84
  27. 27. Possible Plant Sites at Cook Inlet Port MacKenzie near Anchorage (Greenfield Site) Fire Island near Anchorage (Greenfield Site) Tyonek (Greenfield Site) Nikiski on the Kenai Peninsula (Brownfield Site) All except Fire Island are on or within a few miles of the existing natural gas pipeline infrastructure.
  28. 28. Port MacKenzie Site Attributes Port MacKenzie is opposite the port of Anchorage on Cook Inlet, with its own deep water port and surface road connections to Anchorage and the communities to the north of it. A rail spur is to be built in the next couple of years, connecting it to the container ship port at Anchorage and the rail barge port at Whittier, which provides weekly rail service to the US West coast. • The site has good access to power, and is located at a central location within the natural gas pipeline grid, although the pipeline is 9 mile from the plant site. • An improved surface road is also being built into the site, which is within commuting distance of the suburban communities north of Anchorage, where large numbers of well trained former military and oil industry workers live.
  29. 29. Nikiski Site Attributes Nikiski is a brownfield site, with several existing gas fed industrial plants: LNG export plant built in 1969 that is still operating, with its licensed recently renewed through 2011. Agrium Ammonia/Urea plant, built in 1968, which was shut down in 2007 due to lack of affordable local natural gas. BP Gas to Liquids pilot plant is still in operation. A Tesoro refinery, built here in 1969, is still the most sophisticated one in Alaska as the others are crude topping facilities. There is also a former Chevron refinery site there, which was closed down years ago. This area was chosen by Dow Chemical for a potential petrochemical plant in the 1980’s, but the land was never purchased by them, and the project died. The site has a cogeneration power plant that doesn’t utilize the steam section. It also has significant natural gas infrastruture and a port facility, with surface roads to Anchorage, but no railroad.
  30. 30. Logistics to Asia & US West Coast Cook Inlet has advantaged logistics to the US West Coast and Asia due to its location in the middle of the great circle route, with the potential for additional backhaul freight rate reductions to Asia. >3,000 vessel passages/ year
  31. 31. Channel to Market Issues An Asian company would be considered a domestic supplier in the US market if it has production capacity in Alaska, which could help in marketing to customers and in its dealings with the government. An Alaskan plant would not only have duty free access to the entire US market, but would also be able to participate in the North American Free Trade Agreement with Canada and Mexico, as well. The first mover on petrochemical investment in Alaska will understand the local situation better than latecomers will, and is better positioned for additional future petrochemical and downstream investments. Partnering with or buying a US company could facilitate market development activities for an Alaskan plant’s owner (IPIC bought Nova, and SABIC bought GE Plastics).
  32. 32. Investment Climate Issues Political stability of the US government and tax system. A weak dollar could favor a US investment that is based on domestic capital, operating costs and raw materials. Environmental permitting can be difficult, but this will be eased somewhat by sharing work done for the pipeline. Cycle timing is favorable for manufacturers.The Open Season negotiations are taking place at the bottom of the chemical cycle trough occurring in 2010. Investment in productive assets now is a way to use funds that might be underperforming in financial investments. Alaska will be an ally in this process. This is not an acquisition of an existing company, but rather the establishment of a new presence/company in Alaska. Alaska will strongly support that endeavor.

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