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Exxon sews up production well starts Drilling kicks off $1.3 billion Point Thomson gas cycling project; key rulings expected in dispute between Alaska and companies Wesley Loy For Petroleum News
ExxonMobil announced Sept. 9 it has completed drilling and casing the surface section of the first production well in the company’s billion-dollar project to produce hydrocarbon liquids from the Point Thomson field on Alaska’s North Slope.
The Nabors 27E rig in August finished drilling the well to a target surface section depth of 4,875 feet, Exxon said. In May, the rig drilled a companion injector well to a similar depth.
Exxon said it plans to complete both wells to full depth by the end of 2010. The company couldn’t drill deeper this summer, as state regulations forbid penetrating hydrocarbon-bearing rock between April 15 and Nov. 1.
The two wells are part of the first phase of Exxon’s planned five-well, $1.3 billion natural gas cycling project at Point Thomson. The remote field straddles the Beaufort Sea coastline about 60 miles east of Prudhoe Bay.
Exxon has said it aims to produce 10,000 barrels of gas condensate per day for shipment down the trans-Alaska oil pipeline.
Other major Point Thomson owners participating in the drilling include BP and ConocoPhillips.
“We are progressing the development of Point Thomson consistent with the Alaska Department of Natural Resources Interim Decision of January 2009 and the Plan of Development submitted in February 2008,” said Dale Pittman, Exxon’s Alaska production manager. “We place the highest priority on safety and care of the environment. We are on schedule to begin production at Point Thomson by year-end 2014.”
Backdrop of conflict The drilling activity is the first at Point Thomson since 1983.
Lack of production from the field, which long has been known to contain rich reserves of natural gas as well as some oil, long has been a sore point for Exxon’s landlord, the State of Alaska. In recent years, state officials have taken steps to prod the oil companies toward development, which means tax and royalty revenue plus jobs.
Those steps included terminating the Point Thomson unit and declaring that leases within the unit had expired.
Exxon, which for many years argued production from the remote Point Thomson field was uneconomic or impractical for lack of a North Slope natural gas pipeline, offered up the gas cycling project as part of a strategy to hang onto the Point Thomson acreage, which state officials had declared they were prepared to offer for lease to new owners.
After a five-day hearing to consider oil company appeals, state Natural Resources Commissioner Tom Irwin made a partial policy reversal, issuing a “conditional interim decision” on Jan. 27 reinstating two of the 31 leases (ADL 47559 and ADL 47571).
In exchange, Exxon would have to keep its pledge to drill a pair of wells on those leases right away.
That’s just what Exxon set about doing, hiring dozens of contractors to carry out the work.
But the larger fight for control of the hugely valuable Point Thomson property is far from over.
Irwin has yet to issue his final decision on the status of Point Thomson leases.
Even more important, perhaps, is a forthcoming ruling from state Superior Court Judge Sharon Gleason. She is likely to decide by the end of the year whether the state was right — or wrong, as Exxon and other companies argue — in terminating the Point Thomson unit.
If the judge sides with Exxon, the effect of unitization is to extend leases that otherwise would have expired long ago.
However, Gleason isn’t expected to have the last word, as the losing party is likely to appeal to the Alaska Supreme Court.
Huge costs, rich prize Exxon says the partners are throwing down big money on Point Thomson. They committed $120 million to the drilling and development activities in 2008, and expect to invest an additional $250 million this year.
What’s more, the Nabors 27E rig needed about $35 million in upgrades for drilling the brawny wells required to safely tap the high-pressure Thomson sands reservoir.
Point Thomson holds an estimated 8 trillion cubic feet of gas — about a quarter of all the known gas reserves on the North Slope — plus about 200 million barrels of condensate, Exxon said.
Point Thomson gas is considered a crucial component for a proposed multibillion-dollar natural gas pipeline from the Slope into Canada.
“ExxonMobil will continue to bring innovative technology and world-class management expertise to the project,” said the company’s Sept. 9 press release on the Point Thomson drilling. “Field development will include a gas cycling plant designed to produce hydrocarbon liquids and re-inject natural gas back into the reservoir, making Point Thomson the highest-pressure gas cycling operation in the world. In addition to processing facilities, the development will include a pipeline tie-in to the Trans-Alaska Pipeline System (TAPS) and other ancillary facilities and infrastructure.”
Through the year, Exxon has been building out a beachfront gravel work pad at Point Thomson, hauling more than 80 barge loads of equipment and material to the site since mid-July, Exxon said.
The company is suspending its barging activities at times when it could disturb Native hunts for bowhead whales in the Beaufort Sea.
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