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Alyeschem Methanol Plant Gets Boost from North Slope Borough

by | Jul 1, 2024 | Featured, Manufacturing, News, Oil & Gas

Photo Credit: Galyna_Andrushko | ENVATO

In its effort to build the first petrochemical manufacturing plant in the US Arctic, Anchorage-based Alyeschem is getting some local government help. In June, the North Slope Borough Assembly formally asked the Alaska Industrial Development and Export Authority (AIDEA) to financially support the Alyeschem project.

It’s an important vote of confidence for the project, says Alyeschem CEO JR Wilcox, but several steps remain before the company can break ground.

Progress Toward Production

Alyeschem is proposing to combine North Slope natural gas, carbon dioxide, and water into a pair of chemical products, methanol and hydrogen. The hydrogen would be used to treat locally produced high-sulfur diesel fuel to make ultra-low-sulfur diesel (ULSD), which Slope producers are federally required to use in moving equipment to reduce emissions.

Methanol, currently imported thousands of miles to Alaska and then trucked hundreds more to reach the Slope, is widely used to prevent hydrate buildup in gas compression plants and to prevent temporarily shut-in wells and pipelines from freezing. Producing methanol and hydrogen on site would reduce the need for North Slope producers to import the two commodities hauled in the largest quantities up the Dalton Highway.

Alyeschem estimates the plant will reduce CO2 emissions by North Slope operators by 93 percent, or 45,000 tons annually, by blending waste CO2 and natural gas into methanol, further reducing emissions associated with current supply methods on the North Slope. Local methanol production is expected to translate into cost savings for the Trans Alaska Pipeline System tariff while boosting corporate and other tax revenues, including property taxes for the North Slope Borough.

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The North Slope Borough Assembly decision follows a May 16 commitment by AIDEA for up to $70 million in loan financing, intended to match a similar investment in Alyeschem from private equity investors. After construction, Alyeschem would pay back principal and interest to AIDEA plus a permanent royalty based on a per-gallon output basis.

“The Alyeschem project is a game-changer for the North Slope and Alaska’s energy landscape,” Governor Mike Dunleavy said after AIDEA announced its funding decision. “Using Alaska’s natural gas for local production of methanol and ULSD benefits Alaskans and our oil producers by reducing operational costs and dramatically cutting CO2 emissions. This plant is not just an investment in Alaska’s economy but a strategic asset for security and the ability of our producers to continue working in case of supply disruptions thousands of miles away.”

Wilcox says the Assembly resolution came after he and other project proponents took part in work sessions where borough officials had an opportunity to discuss the project. It’s not a wholesale endorsement of the project; Alyeschem will still need to obtain a land use permit and clear other regulatory hurdles.

“They were conscious of the fact that they weren’t passing this resolution guaranteeing that we would get all the permits,” Wilcox says. “They are, I think, very interested in producing things within the North Slope Borough out of oil and gas and doing that sort of value-added manufacturing that allows for more local job creation and economic activity, and promoting the sustainability of the oil and gas operations up there. They are, I think, keenly interested in how those products can be used to support local communities.”

Awaiting an Investment Decision

The project will be built on 5 acres of a 14-acre gravel pad that was built for a separate project to provide liquified natural gas to Fairbanks, since abandoned. But the pad, and a permitted pipeline right-of-way linked to it, offers an intertie with the Prudhoe Bay Unit’s fuel gas system. By using an existing gravel pad, the lengthiest permit process—a permit from the US Army Corps of Engineers to disturb the aquatic ecosystem—is not needed. Alyeschem already holds an air quality permit through Alaska Department of Environmental Conservation (DEC) but still needs fire marshal approval and a spill contingency plan through DEC’s Spill Prevention and Response division.

Before any further permit applications, however, Alyeschem is working toward a final investment decision (FID) on whether to greenlight the project at this time.

“We really have all the major pieces in place; we’re just going through the process of doing the FID right now,” Wilcox says.

The FID is a matter of making sure the equity owners are comfortable with the business model and the commitments to purchase Alyeschem’s products.

According to AIDEA, investments have come from McKinley Alaska Private Investment and BP Energy Partners, through BP Natural Gas Opportunity Partners II. They actively support AIDEA’s commitment to Alyeschem, which is essential for the upcoming FID.

“We appreciate AIDEA, the governor, and Alaska’s support for this great project. This financing is a critical piece of the puzzle and we’re proud of the structure and broad support from all stakeholders involved,” said Logan Birch of McKinley Alaska Private Investment when AIDEA’s funding commitment was announced.

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Welcome to the 2024 Best of Alaska Business special section! For the ninth time we invited our readers to tell us which Alaska businesses they love the most, this year in forty-four categories. Throughout the month of March, you told us who should be featured in these pages, and we're thrilled to be able to publish the results.
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