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Switch the TAP to gas

September 24, 2012

This year marks the 35th anniversary of the completion of Trans-Alaska Pipeline, one of the most ambitious and successful energy projects in US history.

Oil production on Alaska’s North Slope, which has been declining since 1988 when average annual production peaked at 2.0 million barrels per day, is transported to market through the TAPS. Because TAPS needs to maintain throughput above a minimum threshold level to remain operational, its projected lifetime depends on oil prices, but could be as soon as 2025, according to the US Energy Information Administration.

Low flow rates on crude oil pipelines can cause operational issues, particularly in the frigid Arctic. On June 15, 2011, the TAPS operator—Alyeska Pipeline Service Company—released the TAPS Low Flow Impact Study that identified the following problems that might occur as North Slope oil production progressively declines below 600,000 bbl/d, thereby resulting in declining TAPS throughput:

-Potential water dropout from the crude oil, which could cause pipeline corrosion
-Potential ice formation in the pipe if the oil temperature were to drop below freezing
-Potential wax precipitation and deposition
-Potential displacement of the buried pipeline due to soil freezing and thawing, as pipeline operating temperatures decline

Meanwhile Trans-Canada Pipelines (TCPL) is working with Exxon, ConocoPhillips and BP to cobble together a project to export stranded north slope gas to Asian markets. Industry estimates have pegged Alaska’s LNG total project cost at $40 billion to $50 billion, factoring in a pipeline (cost $20 billion to $26 billion) and liquefaction plant.

TCPL itself is studying the conversion of its mainline pipeline, that carries Alberta natural gas to Ontario, from gas to oil.

Also, there are three LNG projects being planned for northern BC. The Kitimat LNG project is thought to cost $5-6 B. Initial plant capacity of 5 million metric tons per annum (mmtpa) liquefied natural gas (LNG) output.

Asian demand will lead a 17 percent global increase in gas demand by 2017 from 2011, the International Energy Agency forecast in June. 

Commentary

Pipelines can be converted from gas to oil. They can also be converted from oil to gas. At a $30 B price tag for a new gas pipeline it may make better economic sense to convert TAPS to natural gas. Right now the Asian natural gas market beckons, with prices being 5-6 times the North American price. I would like to see the business case of using TAPS for natural gas vs. constructing a new natural gas line from the north slope.

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