NEWS BULLETIN

March 30, 2012 --- Vol. 18, No. 26March 2012

Point Thomson deal aims for full-field development

The Point Thomson settlement Gov. Sean Parnell announced this morning features both incentives and penalties designed to push ExxonMobil and its partners to start production as soon as possible and then work toward full-field development.

More effort means the companies can retain more acreage. They can lose ground if they don’t keep commitments.

“The companies are on the clock,” Dan Sullivan, state natural resources commissioner, said in a downtown Anchorage press conference.

The dense, 85-page settlement agreement resolves a long legal conflict the state triggered in 2005 when it began taking steps to invalidate Point Thomson leases for lack of field development.

The Point Thomson unit, located along the Beaufort Sea coast some 60 miles east of Prudhoe Bay, contains 38 leases on more than 93,000 acres of land, the state says.

The settlement requires the oil companies to begin producing natural gas condensate by the end of the 2015-16 winter season. The production of at least 10,000 barrels per day will come in part from two wells ExxonMobil, as field operator, already has drilled on Point Thomson’s central pad. Production facilities still must be installed.

The companies also must build a common carrier pipeline with a capacity of 70,000 barrels per day to link Point Thomson and the highly prospective eastern North Slope to the Badami field to the west. From there, production ultimately will enter the trans-Alaska oil pipeline.

Both these items — the start-up production and the pipeline — appear to be very similar to what ExxonMobil had previously pledged to do.

The settlement further requires the companies to drill a well into the Thomson sand from Point Thomson’s west pad by the end of the 2016-17 winter season.

The other major stakeholders at Point Thomson are BP, Chevron and ConocoPhillips.

“The companies have agreed to firm timetables for production at Point Thomson,” Sullivan said in a press release issued from the governor’s office. “The animating principle of this settlement is that the companies must earn their acreage. The more work, more commitment, more investment and more production that occur, the more acreage the companies will retain.”

The settlement lays out a “clear path” and alternatives for full-field development, and these alternatives “if pursued” will need billions of investment dollars, the press release said.

One alternative requires a “complex reservoir integration” between Prudhoe Bay and Point Thomson. This would involve transporting Point Thomson dry gas to Prudhoe Bay for injection, which would help boost Prudhoe oil production.

Sullivan noted that, aside from the state negotiating a settlement with the oil companies, the companies negotiated commercial terms privately among themselves.

The agreement, plus a very helpful 20-page Point Thomson settlement overview and other documents, are available at http://dnr.alaska.gov/commis/priorities/point_thomson.htm.

—Wesley Loy

Alignment on commercializing North Slope gas

As part of the Point Thomson settlement agreement, ExxonMobil, ConocoPhillips, BP and TransCanada have agreed on a work plan aimed at commercializing North Slope natural gas resources.

ExxonMobil and TransCanada have been working on a project to take North Slope gas to markets in the Lower 48 under the framework of the Alaska Gasline Inducement Act, or AGIA, but there has been general agreement that alignment between all of the North Slope producers, a pipeline company and the state will be necessary to commercialize North Slope natural gas.

Because of a huge supply of natural gas available currently in the Lower 48 and higher market prices in the Far East, Alaska Gov. Sean Parnell has called for alignment around a liquefied natural gas project at tidewater in Southcentral Alaska.

The agreement is just the first step, Parnell said at a press conference this morning announcing the alignment.

The company CEOs laid out some of the work they see ahead in a letter, dated today, announcing alignment under an AGIA framework.

They said the commercial potential of the 35 trillion cubic feet of discovered natural gas on Alaska’s North Slope could be unlocked “under the right business climate” and said “competitive and stable fiscal terms with the State of Alaska” will have to be established before the state’s gas resources can be commercialized.

Parnell said that if other benchmarks are met — completion of discussions by the third quarter of the year to determine what potential exists to consolidate efforts between AGIA and the Alaska Gasline Development Corp., a state entity working on an in-state natural gas pipeline; hardening of numbers for an Alaska LNG project; and identification of a pipeline project and an associated work schedule — that the 2013 Legislature would take up gas tax legislation designed to move the project forward.

—Kristen Nelson

EAB rejects appeal against Shell’s Kulluk air permit

The Environmental Appeals Board, or EAB, has rejected the appeal by Earthjustice on behalf of several environmental groups against the Environmental Protection Agency’s air quality permit for Shell’s use of its Kulluk floating drilling platform for exploratory drilling in the Alaska Beaufort Sea, starting this summer.

In an order issued today the EAB, the panel of judges with final authority over decisions made by the Environmental Protection Agency, said that the petitioners’ against the air permit have failed to show that the agency erred in issuing the permit.

“For the foregoing reasons, the board concludes that none of the petitioners have demonstrated that review of (the permit) … is warranted on any of the grounds presented. The board therefore denies review of the permit,” the EAB wrote in its order.

—Alan Bailey

See stories in April 8 issue, available online at 11 a.m., Friday, April 6, at www.PetroleumNews.com


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