November 22, 2005 --- Vol. 11, No. 96November 2005

Point Thomson drilling deferred

Commissioner Mike Menge of the Alaska Department of Natural Resources has granted a request from Point Thomson unit operator ExxonMobil Production giving the company until May 31, 2006, to appeal an October decision finding the unit in default, and granting a six-month extension for beginning development drilling at the field.

A September decision, amended in October, by former Natural Resources’ Division of Oil and Gas Director Mark Myers, denied an ExxonMobil request for an extension of the beginning of drilling. That date, based on commitments from the last expansion of the unit, required ExxonMobil to begin development drilling by June 15, 2006, in exchange for the state’s agreement to an expansion of the unit.

At the time of the expansion the unit owners planned to develop Point Thomson as a gas cycling project, taking off condensates, selling those liquids down the trans-Alaska oil pipeline and re-injecting the gas. Re-injection at Point Thomson would be costly because the reservoir is highly pressurized. The companies later determined that economics were not favorable for a gas cycling project — a determination that Myers said was premature because it lacked information that a well drilled this winter would provide.

When the division rejected ExxonMobil’s most recent plan of development in September, then Director Myers declared the unit to be in default. The Oct. 27 amended decision said the proposed plan of development was denied because it “makes no commitment to timely develop and produce PTU oil, gas, or gas condensate.”

The amended decision, also signed by Myers, triggered a 20-day appeal period to the commissioner, and gave ExxonMobil 90 days (by Dec. 29, 2005) to submit an acceptable plan of development to “cure” the default.

On Nov. 9 ExxonMobil wrote Commissioner Menge and requested an extension of the appeal time, “and of the time to cure set out in that decision, to May 31, 2006.” ExxonMobil said that during that time the unit owners “will continue with activities set forth in our plan of development necessary to progress a gas sales development” at Point Thomson. The company also requested a six-month extension of the deadlines in the 2002 unit expansion.

A two-sentence Nov. 10 response from Menge acknowledged receipt of ExxonMobil’s letter and said: “After careful consideration of the issues, I have decided to grant ExxonMobil’s requests for extensions of time set out in your letter.”

Editor’s note: See full story in the Nov. 27 issue of Petroleum News, which will be online at this coming Friday at noon.

Kerr-McGee delays decision on Nikaitchuq development

Kerr-McGee does not expect to make a decision on development of its Alaska North Slope Nikaitchuq discovery before the end of the year, as previously indicated.

The company had initially hoped to both sanction Nikaitchuq development by the end of this year and begin construction of its first of four potential production pads.

If Kerr-McGee was able to remain on schedule it would have produced oil from its first pad in March or April 2006, setting a record for the shortest time between the discovery of a field and when it went into production.

“I can tell you we are still evaluating Alaska, but do not expect a sanctioning decision this year,” Kerr-McGee spokesman John Christiansen told Petroleum News Nov. 22.

Christiansen declined to say more but he did provide an information sheet handed out by Kerr-McGee as part of a Nov. 15 Bank of America presentation indicating four issues the company was still trying to resolve in Alaska before deciding to proceed with Nikaitchuq development. Those issues were reservoir stimulation, royalty relief from the state of Alaska, and pipeline and processing agreements with North Slope infrastructure owners.

Permitting was also listed but Petroleum News could not find a permit in public records that had not been issued for the project.

At full capacity Nikaitchuq is expected to produce 60,000 barrels of oil per day and small amounts of natural gas through 2026.

Editor’s note: See full story in the Nov. 27 issue of Petroleum News, which will be online at this coming Friday at noon.

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