Effort to obtain North Slope propane may have hit a dead end

An effort to bring propane from the North Slope for use in home heating and possibly as a vehicle fuel may have hit a dead end.

The Alaska Oil and Gas Conservation Commission ruled Aug. 17 that the practice by Prudhoe Bay producers to inject propane that is part of natural gas produced with crude oil back into the underground reservoir does not constitute “waste.”

State law prohibits oil field practices that result in the loss, meaning lack of full recovery and use, of oil and gas fluids. The AOGCC, a quasi-judicial regulatory commission, has the responsibility of enforcing that.

Harold Heinze, a former state natural resources commissioner and former president of ARCO Alaska, had petitioned the commission last December that the refusal by BP, the Prudhoe Bay operator, to sell propane from the gas that is produced and then reinjected, constituted waste.

Once injected back underground much of the propane may never be recovered from the reservoir, Heinze had argued.

Heinze was formerly executive director of the Alaska Natural Gas Development Authority, which had worked to facilitate a project to move propane off the slope for use as a fuel by consumers and businesses. Rural communities had expressed interest in propane as an alternative to conventional fuel oil, which is very expensive.

At a June 19 hearing on the matter BP argued all the propane produced with the gas at Prudhoe was needed for additional oil recovery. In its Aug. 17 decision the AOGCC agreed with the company.

Natural gas is produced along with crude oil in many oil wells and the gas is normally sold to local customers, but where there are significant commercial customers, as on the North Slope, the field operators must find other uses for the gas. Most of it is now rejected back into the reservoir, where it helps maintain reservoir pressure and oil production. Flaring of produced gas is not allowed by the AOGCC.

Some of the gas produced at Prudhoe Bay is used for local power generation and space heating. Also, many of the natural gas liquids in the gas, including propane, are extracted from the produced gas, with some of the heavier liquids mixed with oil and shipped through the Trans Alaska Pipeline System. The lighter gas liquids, including propane, are used in Enhanced Oil Recovery to extract more oil from the producing fields.

Heinze, who has knowledge of the North Slope oilfield operations from his days at ARCO, felt some of the propane could taken off and moved by truck to Fairbanks, or even shipped by barge down the Yukon River to small villages.

The field producers had initially appeared open to this while ANGDA developed the propane idea but then apparently changed course, Heinze said. The petition Heinze filed with the AOGCC was to get the producers to state their reasons and to put testimony on the record, he said.

BP argued at the June 19 hearing that propane injected into the reservoir as part of an EOR project or even as a small part of the main “residue” gas stream left after most liquids had been extracted, was effective in recovering additional crude oil.

The AOGCC affirmed BP’s conclusions in its findings: “The selling of 1 barrel of propane that could have been used (in enhanced oil recovery) will result in the loss of about 0.7 barrels of oil.”

The loss is worse, however, because a barrel of crude oil has a greater energy content than propane. On a “barrel of oil equivalent” comparison, adjusted for the differences in energy value, the sale of one BOE (barrel of oil equivalent) of propane results in the effective loss of 1.08 barrels (in BOE) of oil, the commission found.

On the basis of that, the commission found the propane injection to be beneficial in recovering more oil, and that waste was not occurring.

Heinze said he was satisfied with the decision.

“The commission was focused on its primary job, which is recovery. BP did a good job of proving its case that every molecule of propane is needed, using the existing facilities, to recover oil,” he said.

There are still lingering questions, however. One is that if the propane is effective in enhancing oil recovery, the producers should show why they are not investing in expanding the gas process facilities to extract more propane and use it in EOR, Heinze said.

“However, this is for someone else to pursue. From a practical standpoint, the issue is over for me. I accomplished what I set out to do, which is to give the issue a fair hearing and put sworn testimony on the record,” he said.

11/11/2016 - 11:06am