AGDC releases plan for gas pipeline off-takes

  • By Tim Bradner
  • Sunday, June 21, 2015 10:47pm
  • News

The state-owned Alaska Gasline Development Corp. has developed preliminary designs for “offtake” facilities that would allow communities to take natural gas from a large-diameter gas pipeline, if one were built.

The designs were presented to AGDC’s board of directors at its June 11 meeting.

Under legislation allowing the state to participate in the large Alaska LNG Project, the state has the responsibility to designate up to five gas “offtake” points for communities along the pipeline route, and to assist in developing facilities including lateral pipelines, such as one planned to be built to Fairbanks from the route of the large gas pipeline.

So far, offtakes have been designated at points near Fairbanks, a “North Cook Inlet” location (presumably in the Matanuska-Susitna Borough) and a “South Cook Inlet” point, near Nikiski on the Kenai Peninsula.

Nikiski is also the location of a planned large gas liquefaction plant for the project, which would produce LNG for export markets.

The facilities to extract gas, condition it and transport the gas to communities and condition the gas for home heating or local power generation are not the responsibility of the Alaska LNG Project.

AGDC, the state corporation, has been given that responsibility. Preliminary plans for offtake facilities presented to the corporation’s board June 11 include four possible designs. One is a “macro” off-take facility that could handle 80 million cubic feet to 330 million cubic feet per day, and that could cost $37.6 million. A second is a “mini” offtake unit that would handle 20 million cubic feet to 75 million cubic feet per day, and that could cost $28 million.

A third is a “micro” offtake facility that would handle 400,000 cubic feet to 2 million cubic feet per day, with an estimated cost of $14.8 million. The fourth is a “nano” unit that would handle 40,000 cubic feet to 250,000 cubic feet per day, and that would cost $13.8 million.

Meanwhile, AGDC has also taken a first cut at what the possible in-state demand for gas might be from the North Slope. This is important for the Alaska LNP Project planners to know because they must be able to assure that supplies will be available for LNG export customers.

Forecasting this is complicated, however, because it must be assumed that Cook Inlet will continue to produce gas for in-state use.

AGDC’s board was told June 11 that the possible in-state demand for North Slope gas might be about 70 billion cubic feet of gas yearly in 2030, five years after the project is to start up, and increasing to about 100 billion cubic feet of gas per year by 2040.

The assumption included in the forecast is that Cook Inlet production will decline from its current rate of about 100 billion cubic feet of gas per year to about 44 billion cubic feet of gas per year by 2030 and 25 billion cubic feet of gas per year by 2040, therefore increasing the demand for North Slope gas.

This is a “base case” that assumes no large new Cook Inlet discoveries and only one major new industrial customer, the Donlin Gold project. There is also a high demand case, however, that includes possible new mines being developed.

In another development, the state gas corporation has officially put Gov. Bill Walker’s plan for an expanded state-led gas pipeline on the shelf.

“We’ll be holding this in abeyance,” said board chairman John Burns at the meeting.

Walker had asked the corporation to pursue engineering studies to expand a smaller gas pipeline plan but the Legislature, in a budget move, took $157 million from AGDC’s budget that would have been used for the work and re-appropriated it to support schools.

Staff to the gas corporation had meanwhile prepared estimates for the upsizing engineering costs for the board but did not formally present them given the Legislature’s action.

Also, an engineering and design consortium AGDC had hoped to use for the redesign for a scaled-up project, which was under contract for design and engineering for the gas treatment plant for the smaller pipeline, has now been demobilized, the board was told.

Remobilizing the team would add to costs of the engineering.

For several years AGDC has been working on a plan for a smaller 500 million-cubic feet per day pipeline from the North Slope that would serve as a backup to get gas to Alaska communities in case the large Alaska LNG Project is not built.

The engineering and design work on that project, known as the Alaska Stand-Alone Pipeline, or ASAP, is now complete and a supplemental environmental impact statement required because of design changes is due to be complete in 2016. The project is essentially ready to go if it needed.

Walker had wanted to increase the scope of ASAP, however, so that it could carry gas volumes similar to those in the larger industry-led project. That unleashed a barrage of criticism, however, from legislators and others that the governor wanted a state-led pipeline in competition with the industry project.

Despite that furor, the work on the smaller state pipeline has yielded positive benefits for the larger gas project, in which the state is a 25 percent partner.

The routes of both pipeline are now aligned to follow the same rights-of-way, which means that the Alaska LNG Project can benefit from environmental and technical work done by AGDC for its smaller pipeline.

“This is a huge benefit for Alaska LNG,” said Dave Cruz, an Alaska contractor and board member of AGDC who chairs the board’s technical review committee.

“There has been good science and good data that has been generated, and Alaska LNG has accepted it.”

The Legislature had earlier appropriated $305 million for ASAP to do engineering and permitting sufficient to get the smaller project to a construction decision. About $118 million of that has been spent to date, leaving $187 million. That is now reduced by $157 million due to the Legislature’s re-appropriation this spring, however.

Meanwhile, $48 million authorized earlier this year for AGDC’s remaining work on ASAP, of which $28 million has been spent to date, is on projects that also benefit the larger pipeline. On work that benefits both projects, Alaska LNG Project pays 80 percent, the AGDC board was told.

The state corporation is also undertaking geotechnical work this summer on behalf of the industry-led project, taking advantage of special, streamlined permit authority on state lands given the gas corporation by the Legislature.

On work like this that is solely on behalf of Alaska LNG, the consortium reimburses AGDC for 100 percent of its costs, although the state might pay part of that if it involves work at the LNG plant, in which the state is a full 25 percent partner. The state is in a partnership with TransCanada Corp. on the pipeline and North Slope gas conditioning plant.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

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