NEWS BULLETIN

October 22, 2010 --- Vol. 16, No. 94October 2010

Settlement talks prompt request for second delay in Point Thomson case

Lawyers for the state and ExxonMobil are again asking the Alaska Supreme Court for a delay in the proceedings in the Point Thomson case.

The two sides say they want to concentrate on trying to settle the battle for control of Point Thomson, an undeveloped oil and gas field on Alaska’s eastern North Slope.

The state Department of Natural Resources had sought a Supreme Court review of an unfavorable lower court ruling. But now DNR is asking for an extra three months, until Feb. 1, to file its opening brief. ExxonMobil joined in the state’s motion.

In August the Supreme Court granted a similar request for more time.

“DNR and ExxonMobil agree that the additional extension will enable DNR to apply its limited resources to the settlement effort, and for all parties to participate in ongoing settlement discussions without incurring unnecessary expense,” the two sides said in the joint motion filed Oct. 19 with the Supreme Court.

“DNR and ExxonMobil have made progress in the settlement talks but recognize that additional time is needed to resolve this complex matter involving more than 100,000 acres of state land and 30 plus state oil and gas leases,” Assistant Attorney General Richard Todd said in an affidavit.

Eni may have Nikaitchuq first oil by Dec. 15

Eni Petroleum might bring the Nikaitchuq unit into development by Dec. 15.

The local subsidiary of the Italian major recently told state regulators that it believes crude oil production could begin a two weeks ahead of schedule. Eni previously estimated that it would bring the near shore North Slope unit online by Dec. 31.

Eni told the Regulatory Commission of Alaska that expects to produce a minimum of 3,500 barrels per day from six oil wells, four of which have already been drilled.

Eni attributed the potential bump in scheduling to the completion of several final details.

The company said it has finished constructing the processing facility on Oliktok Point, which will prepare crude oil for transportation, and is “ahead of schedule” on installing equipment and utilities associated with the facilities. Eni has also already finished building other infrastructure like a new gathering line and a fuel gas pipeline. Eni said it expects to sign the contracts to buy and move that fuel gas by Nov. 15.

Eni said it is still waiting for the Alaska Oil and Gas Conservation Commission to approve certain metering equipment, but expects a ruling “no later than” Dec. 1.

Eni is looking to connect its new 14-mile crude oil gathering line into the Kuparuk Pipeline, where oil can then be transported to the trans-Alaska oil pipeline. The Kuparuk Transportation Co. is asking RCA to approve the interconnection.

Cook Inlet producer, pipeline operator reach tariff settlement

A small oil producer and a pipeline operator along Alaska’s Cook Inlet have reached a settlement of a tariff dispute.

Cook Inlet Energy LLC and Cook Inlet Pipe Line Co. filed the settlement Oct. 19 with the Regulatory Commission of Alaska. The two companies say that, if approved, the settlement would “fully resolve all issues.”

Anchorage-based Cook Inlet Energy, which operates oil and gas wells on the west side of Cook Inlet, had complained that CIPL’s 259 percent rate increase, to $14.57 per barrel, was excessive. Texas-based CIPL, which operates a 42-mile pipeline along the Inlet, attributed much of its rate increase to damage from the 2009 eruption of nearby Redoubt volcano.

The settlement sets out a methodology for determining Cook Inlet Energy’s pipeline transportation rates through the year 2014.

For the remainder of 2010, Cook Inlet Energy would pay CIPL a rate of $8 per barrel shipped.

“The rates to be paid by CIE to CIPL during the calendar years 2011 through 2014 shall be determined by dividing an agreed annual CIPL revenue requirement of $17.28 million for each such year of the term of the Settlement Agreement by the forecasted total annual CIPL throughput for each such year,” the Oct. 19 commission filing says.

At the end of each year, including 2010, a “true up” adjustment would be made based on the actual total annual CIPL throughput.

As part of the settlement, Cook Inlet Energy would commit to pay for transportation of a minimum of 260,063 barrels of production in 2010 and 346,750 barrels in each of the years 2011 through 2014, “whether or not it actually ships the volumes.”

See stories in the Oct. 31 issue of Petroleum News, available to subscribers online at noon, Friday, Oct. 29 at www.PetroleumNews.com


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