Northern Energy Independence
As Landmark Study Nears Completion, Hopes High for a Clean Homegrown Alternative to Diesel.
Within 120 km of Inuvik and 85 km of Tuktoyaktuk lie three massive gas fields – Niglintgak, Taglu and Parsons Lake – capable of producing 6.1 trillion cubic feet of sweet natural gas. That’s enough to heat one million Canadian homes for about 50 years.
The reserves were developed to anchor the Mackenzie Gas Project which was to transport that gas to markets south of 60. The official dissolution of the project stranded some of Canada’s largest gas fields.
With world energy markets now awash with gas, there was little hope for producing vast fields like these in the Beaufort Delta region anytime soon. And lacking sufficient infrastructure, the cost of developing them for local and regional markets was prohibitive.
Then along came the Inuvik-Tuktoyaktuk highway triggering a new look. In early September 2017 the Canadian Northern Economic Development Agency (CanNor) announced funding of $467,200 for an Inuvialuit Regional Corporation (IRC)-led feasibility study to assess the potential for natural gas development in the Beaufort Delta region. CanNor’s contribution was joined by the GNWT and the IRC, investing $58,400 each for a total of $584,000.
The idea makes good sense. Electricity costs in NWT are high due to the small number of communities connected to the limited hydroelectric grids, high fixed and operating costs, and isolated diesel plants. Additionally, the communities’ small customer base, small size diesel plants and fuel imports prohibit economies of scale, increasing rates. Moreover, burning diesel for power has a high greenhouse gas impact.
So IRC seeks to lower living costs for local residents and businesses by securing a regional energy source to replace diesel. Should local natural gas prove viable, it would provide clean energy security, employment opportunities, and support a sustainable economic future for the region. The opening of the Inuvik to Tuktoyaktuk all-season highway last fall was a major boost for the concept, providing critical access to the Inuvialuit-owned lands with gas potential.
The Beaufort Delta Regional Energy Study is two-phase – the first is already done, but results won’t be released until final completion. It assessed resource viability and developed a local energy supply and distribution model with the focus on Aklavik, Fort McPherson, Inuvik, Tsiigehtchic and Tuktoyaktuk. The second is now exploring a more regional model – taking in the coastal communities of Paulatuk, Sachs Harbour and Ulukhaktok.
Plenty of Interest
Response to the RFP was keen, says Duane Ningaqsiq Smith, IRC’s Chairman and CEO. “The study attracted a lot of interest not only from companies that wanted to do it but also just to see how it proceeds,” he says. The study was contracted to global consulting firm Hatch.
The study focuses primarily on natural gas replacing diesel for power generation. Currently, generating plants in the five communities of Phase 1 produce a combined total of 19.7 MW of electricity, all from diesel plants with one exception. Inuvik has, in addition to diesel power, three generators that run on natural gas which until recently was supplied locally from the Ikhil well production but is now fed by LNG trucked via the Dempster Highway. According to the Northwest Territories Power Corporation (NTPC), total diesel consumed for the five communities in the 2016-17 year for power generation was 7.2 million litres. The coastal communities included in Phase 2 are supplied solely by diesel generation totaling 2.8 MW, burning a further 1.2 million litres in the year; that’s 8.4 million litres that could be eliminated. As well, there’s potential demand from future heavy industrial users like regional mining developments.
There are 10 proven wells identified for the study, “chosen to be close to the new Inuvik-Tuktoyaktuk highway,” says Smith. “Because that drastically reduces the cost of access to the gas.”
Various options and combinations are being examined: CNG, LNG, pipelines, trucking, barging. “We’re looking at those options and what they would cost, compared to what is done now,” says Smith.
CNG is made by compressing natural gas to less than one per cent of its volume. It can be used in place of gasoline or diesel in any application with a conversion kit. It can be shipped by truck or barge from the compression station. Piping natural gas would mean routing directly to individual communities.
Small-scale LNG may prove to be the favoured option. “My understanding is the technology has advanced far enough that, at the scales we are looking at, LNG is possible without those large liquefaction plants like they have down south,” says Smith.
Indeed, small-scale LNG is emerging as an affordable alternative to diesel or fuel oil in remote communities and mining sites worldwide.
“Advances in the technology used to liquefy, transport, and re-vaporize natural gas have made LNG a viable option for remote customers,” states a May 2016 study by ICF International for the Canadian Gas Association entitled Economic and GHG Emissions Benefits of LNG for Remote Markets in Canada. “Natural gas is liquefied to reduce its volume, making it easier to transport in large quantities with truck tanks. The delivered gas is stored by customers on-site as a liquid and vaporized when needed.” And a bonus: in Canada, natural gas currently costs less than diesel for an equivalent energy content.
But capital costs need to be considered. Liquefaction plants are the first stage of any remote LNG supply chain. Tanker trucks are required to supply the remote location, which will need infrastructure for unloading, storing, and vaporizing the LNG. And the end customer will require natural gas burning equipment, although most diesel generators can be converted. Much of this is already in place at Inuvik.
Other Products Possible
The economic model for study includes other natural gas products such as NGLs and gas-to-liquids (GTL), too. GTL production could supply a local source of diesel and naphtha gas.
Although not part of the current study, the gas could be used for residential and commercial use as well, as was done previously in Inuvik, further boosting economic opportunities. “We did connect a lot of the Inuvik residences and businesses years ago,” says Smith. “In that regard we already have experience – we’ve been running the Ikhil well, the pipeline, and the power plant with the power company for some years. We’d definitely have a lot more employment and opportunities in the region for transportation, producing the gas as well as possibly training the other communities in the switch over to operating with gas from diesel.”
And Smith reckons the availability of gas can spur new small businesses with the promise of cheaper energy. “We have seen results in Inuvik,” he says. “They were able to switch over to appliances that are more energy efficient such as gas stoves, driers and barbecues. And we see opportunities in the region by other activities related to utilizing gas.”
Although some of the communities of the study are in the Gwich’in area, Smith doesn’t think that would impact any royalties involved. “We provide the power to the government that presently runs the power, just like we are doing now out of Inuvik.”
But there is potential for selling gas to more distant markets. “That is something we would look at in the longer-term, such as the Yukon,” says Smith. He figures it would make sense that gas be provided from the Beaufort-Delta, “because where they are getting their LNG from now is the same place we’re getting ours for Inuvik. That’s 2,000 km away for them and if they switch to getting it from here it would knock off 1,600 km either way. And the emissions from the transport would be reduced.” It’s possible: Whitehorse already has generators designed for LNG.
Another vision Smith sees is similar systems up and down the Mackenzie Valley where there’s local gas. “It just makes sense to develop that product for those communities as well,” he says.
At this early phase, NTPC has not been involved in the study but are interested in what may ensue. “As a natural gas consumer, we would consider any natural gas supply options that are competitive with other options,” says Doug Prendergast of NTPC’s public relations.
Smith says there is intense interest from both levels of government, heralding possible financial support down the road. “As we analyze the cost in detail with potential partners, if there was a need for government investment we would present that scenario to them at that point.”
“We are part of the team that will review the outcomes when the report is completed,” says Andrew Stewart, Director of Energy with the Government of the Northwest Territories’ Department of Infrastructure. As to potential participation, “that remains to be seen, we’ll have to wait and see what the best case is and what the supply chain actually looks like for getting the gas to market,” he says. “We are open to considering ways to reduce our diesel reliance for sure; it’s part of our 2030 Energy Strategy released on May 1. And certainly local gas supply and LNG for road-connected communities is part of that vision.”
“Affordability and sustainability are hallmarks of our energy strategy and we are committed to doing our part in reducing diesel reliance in the NWT so if we can find options that make practical and economic sense then we will certainly consider them,” says Stewart. “We have to look at what other priorities there are but it is one we would consider supporting.”
