North Slope propane project: ANGDA, private investors want to extract and truck it to Fairbanks.

• Author: Resz, Heather A.
• Position: OIL & GAS - Alaska Natural Gas Development Authority

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Ahead of a large-scale natural gas pipeline project, a group of public and private partners have approached North Slope producers about buying 5,000 to 10,000 barrels a day of propane to re-sell as a lower-cost fuel option for Alaskans.

The private investors are interested in financing and building a $200 million propane-extraction plant on the North Slope, and then trucking the fuel to

Fairbanks for sale to users, said Harold Heinze, chief executive officer, Alaska Natural Gas Development Authority. From there, barges from Nenana would deliver the propane to villages along the Yukon and Kuskokwim rivers, he said.

A 2002 ballot initiative created the Maska Natural Gas Development Authority, or ANGDA, to "develop a natural gas pipeline from Prudhoe Bay to tidewater on Prince William Sound and a spur line to the gas distribution grid in Southcentral Alaska."

TransCanada and ExxonMobil are working together on the Alaska Pipeline Project. Open season ended in July. And Denali--The Alaska Gas Pipeline is a joint gas line effort between BP and ConocoPhillips. Its open season ends this month.

However, until there is a gas line to monetize the North Slope's 35 trillion cubic feet of stranded gas, the 40,000 to 80,000 barrels of carbon gas drawn to the surface every day are re-injected into the reservoir, Heinze said.

But regardless of which pipeline proposal is constructed, he said, one-third of Alaskans live in areas that won't be served by it. So ANGDA is exploring this separate propane project as a way to provide a lower-cost fuel alternative to rural Alaskans for space heating, electrical generation and cooking, Heinze said.

MARKET-DRIVEN SOLUTIONS

ANGDA commissioned PND Inc. Consulting Engineers in 2005 to study the feasibility of "Propane Distribution throughout Coastal Alaska."

"Implementation of this project could help to address the long-term problem of access to affordable power and heat, allowing value-added industries to develop in remote areas, enhancing community economic development and benefiting all Alaskans," according to the report.

Now, about half of the 15 million gallons of propane used annually in Maska is produced at the Tesoro Refinery in Nikiski and the other half comes from Prince Rupert, British Columbia, Canada, by aqua train to Whittier where it is loaded on the railroad and shipped to Anchorage, according to the PND study.

Especially in communities with year-round barge access, in-state propane...