Officials with BP Exploration Alaska reported late last year that they had successfully proven the efficacy of their gas-to-liquids process being tested at their Nikiski plant, thus taking a major step toward one day making synthetic crude oil, the product of the process, a competitor on the world fuels market.
"We're here to report a great deal of success over the past year," Paul Richards, BP's GTL project manager, told the North Peninsula Chamber of Commerce in October 2003.
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BP began testing operations at the $86 million plant in July of 2003, a few months behind schedule. But by December, the company was reporting having met its short-term goals and was now under way with longer-term testing of the process.
Short-term goals included demonstrating proprietary technologies used to turn methane gas into syncrude: a compact reformer and the Fischer-Tropsch catalyst, which were developed by BP with its partner, Davy Process Technology.
The three-phased process is capable of turning about 3 million cubic feet of natural gas into 300 barrels of syncrude per day, which can then be safely shipped and stored, and eventually used to produce naphtha, diesel or jet fuel.
By year's end, BP reported having produced some 4,100 barrels of syncrude during the testing program. That product has been trucked to the Nikiski Tesoro plant, where it was blended with Tesoro's incoming crude oil supply.
The Nikiski plant is not expected ever to produce commercial quantities of syncrude. That's not what it was designed to do, Richards said.
The testing is meant to assess the technology to ensure design integrity, so it can be moved to commercial application, to allow cost-effective commercialization of stranded gas resources around the world, according to Dave MacDowell, BP's external affairs officer in Anchorage. Just how long the facility will operate will depend on how quickly long-term testing goals are reached, he said.
"There is no specific time line," MacDowell said in an interview in late January. "We are going to be running for as long as it takes to complete our testing program. Our desire is to do that as quickly as possible."
According to Richards, one major success of the testing program so far is that the per-barrel capital cost is lower than the industry average.
"We're actually around $20,000 per daily barrel, and we're moving down the scale," he said in October. "If we get down to $17,000 per daily barrel, we'll be competitive with LNG. If we get down to $10,000, we're actually competing with traditional oil refineries, but that's a long way into the future."
Those figures are not to be confused with the price a buyer would pay for a barrel of syncrude.
"This per-barrel number represents the capital costs required to install each barrel of daily production capacity in a commercial scale plant," MacDowell explained.
For example, at $25,000 per daily barrel production capacity, a commercial scale plant capable of producing 50,000 barrels a day would cost $1.25 billion ($25,000 x 50,000 = $1.25 billion), he said.
Syncrude production may never dominate. When distances and construction costs are right, pipelines would still be the best way to move gas to market. LNG would follow. The process may never be applied commercially in Alaska, MacDowell said.
"A pipeline to serve the North American natural gas market, the largest in the world, represents the most promising option for commercialization of Alaska's North Slope gas," he said.
A commercially viable facility would be much larger than the test facility BP is running at Nikiski. However, parts of the technology being tested the compact reformer, for instance, which is a quarter the size of that used at the Agrium plant would remain small. A commercial plant would use multiple reformers.
BP expects its fledgling technology to work well for many stranded gas applications around the world where gas resides in small, isolated pockets. Alaska's contribution will have been in proving the process will work.
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