World, Alaska topsy turvy on oil, gas; ANWR gas line to Kaktovik?

In a switch that illustrates the world’s oil trade is out of whack, an oil tanker sailed in December from Houston to the United Arab Emirates, a Persian Gulf petroleum province where 2-3 million barrels a day of crude is exported to feed a giant sovereign wealth fund.

Per U.S. government sources researched by Bloomberg and published in a Feb. 6 article, the tanker was carrying very light Texas crude from tight oil wells (commonly and often incorrectly referred to as shale oil).

The cargo of American condensate is preferred to regional grades because its superior quality is better-suited for U.A.E refiners.

“Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the U.K.” the news agency said in the article.

According to the Census Bureau, the U.S. exported about 700,000 barrels of light domestic crude in December to the U.A.E., which the Energy Information Administration indicates is the fourth-largest OPEC producer.

The region’s first cargo of U.S. oil, per Abu Dhabi National Oil Co., or ADNOC, the U.A.E.’s state-owned oil company, was purchased in July for September delivery.

The Middle Eastern country imports extra-light oil to process in a unit known as a splitter. Normally the U.A.E. relies on Qatar for its condensate, but due to a political dispute the country decided in June to ban all petroleum ships from Qatar.

Alaska gas upside down

But in Alaska, Fairbanks Interior Gas Utility, or IGU, is doing a deal to buy Hilcorp natural gas from the Cook Inlet basin to liquefy and then ship north by truck where the LNG is converted back to natural gas for commercial and residential use in the Fairbanks area versus waiting on what is likely to be Doyon’s last, and successful, well in the nearby Nenana basin.

At the same time Nutrien, the owner of the Nikiski/North Kenai, fertilizer facility that employs 400 well-paid, full-time, workers when in full operation, is looking for local gas. (The facility, owned by Nutrien predecessor Agrium, closed in 2007 when it could not get enough natural gas feedstock to operate.)

Can the Nutrien facility afford to ship gas from Nenana if the Fairbanks operation gobbles up all the excess gas in the Cook Inlet basin? PN’s reliable sources say, “no way.”

State subsidies and loans can help, and there are some in place, but should Alaskans use state funds to subsidize such a lop-sided arrangement?

Here’s to wishing there was an easy answer….

ANWR’s proposed natural gas line to Kaktovik

The plant would supply the village with inexpensive natural gas for power and Kaktovik could then sell power to a field development supposedly planned by Chevron at the time.

A request for proposals, or RFPs, allegedly went out for the gas line and power plant in a very private offering before the drilling rig came off the KIC well, the only well ever drilled in ANWR.

Rumor has it the power plant would prevent the U.S. Environmental Protection Agency, or EPA, from hindering field development because of air quality concerns, a ripe source for lawsuits by environmentalists.

Again rumors (not confirmed) say Chevron wanted to proceed with the gas line and the power plant but BP was against the plan. (The companies were 50-50 partners in the Arctic National Wildlife Refuge coastal plain (1002) area leases.)

The only leased acreage in the 1002 area, thought to be highly prospective for oil and gas, is on 92,000 acres of private land - the Native regional corporation for northern Alaska, Arctic Slope Regional Corp., owns the subsurface oil and gas mineral rights and the local village corporation, Kaktovik Inupiat Corp., owns the surface.

The KIC well, drilled by Chevron in the winters of 1985 and 1986, is considered the tightest hole in the world. The well test results are still confidential.

A development plan involving several wells within the Chevron-BP leases was reportedly filed with the feds and then pulled a few days later in hopes a lease sale for federal land in the 1002 area would be held in the near future. (Once a development was declared by public companies Chevron and BP would have had to reveal the KIC well results to stockholders and analysts, which could lead to stiff competition in a lease sale.)

Speaking of an ANWR 1002 lease sale, as previously reported in PN, there are two areawide lease sales planned by the Trump administration in the next 10 years, with the first sale taking place within four years and the second within seven years of this past December.

- KAY CASHMAN