Betting on Alaska's natural gas.

• Author: Swagel, Will
• Position: David Lawrence, manager of gas commercialization and marketing for Arco Alaska Inc. - Interview

Alaska's Prudhoe Bay field produces about 7.5 billion cubic feet of gas each day as a byproduct of oil production. Most of that gas is re-injected back into the wells to maintain pressure in the underground reservoirs to help produce oil, according the BP Exploration (Alaska), Inc. With 26 trillion cubic feet of natural gas reserves proven on the North Slope, and demand for natural gas increasing, it's hoped gas distribution from Alaska will begin within a decade.

BP Exploration, Arco Alaska, Inc. and Exxon Co. are working on ways to take North Slope gas to market through LNG (liquefied natural gas) and/or GTL (gas-to-liquids) methods. The gas-to-liquids' project involves shipment of natural gas through the existing trans-Alaska oil pipeline, though methods are not proven and are considered more costly than the liquefied natural gas method. LNG technology is already in place, but would involve building another pipeline parallel to the trans-Alaska pipeline.

Arco, who owns more probable gas than BP or Exxon, was the first of the big three to come out in favor of a gas line, and promotes the LNG process. In the following interview, Arco's David Lawrence details the company's future plans.

ABM: There are two methods of transporting natural gas. On which is Arco betting?

Lawrence: Arco is looking at all options to commercialize its North Slope gas reserves. We have a base case, and something that we call a dark horse. Our dark horse is gas-to-liquid conversion; our base case is a liquefied natural gas or LNG export project.

The bulk of our resources, at the moment, is dedicated toward our base case, which is the LNG export project. We also have considerable research ongoing with respect to gas-to-liquid conversions, managed at our research laboratory in Plano, Texas.

ABM: LNG would go to the Valdez terminal? And gas-to-liquid would give you more options?

Lawrence: The LNG project has four elements: 1) we have a plan for a gas-conditioning plant on the Slope 2) a new gas pipeline would parallel the existing (trans-Alaska) pipeline to the port of Valdez 3) at the Port of Valdez, we would build a LNG manufacturing facility, storage (facility), and a marine dock adjacent to the existing Valdez Marine Terminal 4) from there we would export the liquefied product to the markets in the Far East.

Of course, if you have the option of gas-to-liquid conversion, that conversion plant could sit on the Slope, and the liquid hydrocarbon product could be put in...