The Alaska Division of Oil and Gas has denied a request from ExxonMobil to extend a decision option for the field, and the owners will continue to have discussions with the state in an attempt to identify a viable project.
ExxonMobil is the unit operator at Point Thomson an undeveloped high-pressure gas condensate field on the Beaufort Sea at the eastern edge of state lands on Alaska’s North Slope. Other major owners include BP Exploration (Alaska), Chevron U.S.A. and ConocoPhillips Alaska.
The state approved a major field expansion in 2001, contingent on development drilling for a gas cycling project beginning at the field by June 15, 2006. The unit owners had an option to opt out of the expansion acreage by June 15, 2003, if they found the development uneconomic, by paying the state $8 million.
The state approved extensions of the decision date — and increased the payment for opting out to $10 million.
In December, ExxonMobil requested the decision date be extended to June 15, 2006, with an increase in the payment amount, in addition to the $10 million, prorated on the decision date. The 2001 expansion agreement calls for development drilling to begin by June 15, 2006, or the owners must pay the state $20 million.
In early January, the Division of Oil and Gas denied the December request to extend the date.
Division Director Mark Myers said in a Jan. 8 letter to ExxonMobil that the division appreciates the “expertise and resources that the owners dedicated” to evaluating the gas cycling project at Point Thomson in coming to the conclusion that “the gas cycling project is currently uneconomic… ” Myers said ExxonMobil representatives met with Division of Oil and Gas staff in early December to discuss how the state’s fiscal system might be changed to make a gas cycling project economic.
However, Myers said in denying the deadline extension, the Point Thomson owners “have not made any specific proposals that would warrant a further extension of the contraction election deadline.”
The Point Thomson owners have a choice, Myers said: Pay the state $10 million and be relieved of further obligations under the agreement, or proceed ahead and begin development drilling by the June 15, 2006 deadline — with $20 million due if that deadline is not met.
The owners are going to stick with the original agreement calling for development drilling to begin by June 15, 2006, Houston-based ExxonMobil spokesman Bob Davis told Petroleum News Jan. 16, and won’t exercise the $10 million option to drop the expansion acreage.
He said the owners are continuing to have discussions with the state in an attempt to identify a project, but said the same concerns expressed in December about resources, cost and revenues still exist.
ExxonMobil told the state in mid-December that “a standalone project prior to gas sales is not economically viable under the current fiscal system.”