October 20, 2006 --- Vol. 12, No. 72October 2006

Point Thomson owners to pay $20 million, surrender 20,000 acres

The Point Thomson unit owners have proposed surrendering the 20,000 acres added to the unit in the state’s 2002 expansion decision and paying the state $20 million, resolving required drilling and development of the eastern North Slope unit which were part of the 2002 agreement.

The owners are also proposing a five-year plan of development to include a well to be drilled into the Thomson Sand reservoir in 2009-10, or a $40 million payment to the state if the well is not drilled, unless the owners are “prevented from drilling the well for reasons of force majeure or permitting delays on timely submitted permit applications.”

Richard Owen, Alaska production manager for Point Thomson unit operator ExxonMobil Production Co. said in an Oct. 18 letter to Department of Natural Resources Commissioner Mike Menge that the obligations the companies undertook in the 2002 unit expansion “were based on a gas injection development” at Point Thomson. “In 2004, a gas injection development was determined to not be commercially viable.” Since then, Owen said, the Point Thomson working interest owners “have been actively pursuing a gas sales development” for Point Thomson.

Owen said the Nov. 10, 2005, extension to the obligations in the 2002 decision was based on the expectation that the fiscal contract for a North Slope gas pipeline project would be approved, resolving the expansion decision obligations. Since it now appears the Legislature will not approve the contract before the Oct. 20 deadline in the current extension, he said, payment of $20 million and surrendering the 20,000 expansion acres is proposed, along with a new plan of development, which, he said, includes “significant commitments” by the Point Thomson working interest owners. Owen said that if the proposal was acceptable, the owners suggest that the settlement be documented and the payment and acreage release be completed by Nov. 15.

The Department of Natural Resources has a Point Thomson hearing scheduled for Nov. 13. The department said the commissioner will have no response to the proposal until the process of gathering information, holding a hearing and considering all the evidence in the matter is complete.

Note: See full story in Oct. 29 issue of Petroleum News, available online Friday Oct. 27 at

Agrium to shut down Kenai plant for the winter on Monday

Petroleum News has been reporting that Agrium’s Kenai nitrogen plant would shut down Nov. 1.

Unfortunately we were wrong.

The company said this morning that the plant is expected to shut down Monday, Oct. 23, “due to lack of gas supply and will not likely restart until some time in early 2007.”

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