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Exxon: Gas looks good First Point Thomson well drilled to depth, Kruger tells Alaska contractors Wesley Loy For Petroleum News
A top ExxonMobil executive drew a generally upbeat picture of coming global oil and gas demand and also broke a bit of Alaska news in a Jan. 22 speech in Anchorage.
“There is consensus that oil and natural gas will continue to supply the majority of the world’s energy needs in the foreseeable future. No other energy sources can match their availability, versatility, affordability and scale,” said Rich Kruger, president of ExxonMobil Production Co.
Speaking to hundreds of oilfield contractors at the Alaska Support Industry Alliance’s annual Meet Alaska conference in Anchorage, Kruger said ExxonMobil will risk huge dollars to meet oil and gas demand.
“Over the next five years, we are planning to invest $25 to $30 billion annually on energy projects. These are record investment levels for us,” said Kruger, according to the written text of his speech.
In Alaska, ExxonMobil is one of the state’s top three oil producers with a major stake in the BP-operated Prudhoe Bay field.
ExxonMobil is aiming to soon join the ranks of North Slope operators as it presses forward with development of the disputed Point Thomson field.
Kruger announced that the first Point Thomson well has now been drilled “to total depth.”
‘Decades and generations’ ExxonMobil Production Co. manages all of ExxonMobil’s oil and gas production globally, including in Alaska. ExxonMobil has comparable units to handle exploration, and to plan and build big capital projects.
Since 2005, Kruger has had such assignments as leading ExxonMobil’s recovery from hurricanes Katrina and Rita, and overseeing a large-scale tight gas development in northwest Colorado’s Piceance basin.
He also has history with Alaska, having managed ExxonMobil’s negotiations with former Gov. Frank Murkowski’s administration for tax terms in an unsuccessful effort to spur construction of a natural gas pipeline.
In his speech, Kruger laid out a compelling case for optimism in the oil and gas industry, despite the present global recession.
Citing an International Energy Agency estimate, Kruger said industry will need to invest more than $25 trillion for the period 2008 through 2030 to meet energy demand.
“Consider that the world currently uses the equivalent of about 240 million barrels of oil per day to fuel transportation, generate electricity, run farms and factories, heat and cool homes, and much more,” he said. “It is an enormous challenge to simply sustain this output, let alone grow it.”
To meet demand will take enormous commitment and focus, Kruger said.
“Time in our industry is not measured in business cycles, and it is not measured in election cycles,” he said. “It is measured in decades and in generations.”
Natural gas is expected to be the fastest growing major fuel source, Kruger said, with demand in 2030 projected to be 55 percent higher than it was in 2005.
“Alaska is in an enviable position to step up and supply natural gas needed here, in Canada and in the Lower 48,” he said. “And now is the time to step up.”
On the Alaska gas line ExxonMobil is partnering with TransCanada Corp. on a proposed natural gas pipeline project from the North Slope to Alberta. The partnership expects to hold an open season later this year to attract customers. It’s competing against a rival project called Denali, involving partners BP and ConocoPhillips.
ExxonMobil invests in major projects based on basics such as resource quality and available technology, not the news of the day, Kruger said.
“While gas prices have fallen considerably from the highs we saw as recent as 2008, ExxonMobil has the confidence and ability to invest when we find opportunities with the right fundamentals,” he said.
The partnership with TransCanada makes sense, Kruger said.
“We joined this team after assessing the fundamentals and concluding that this approach provides the best avenue to commercialize Alaska’s North Slope natural gas,” he said. “We believe combining the experience of ExxonMobil and TransCanada will ensure excellence in project planning and execution.”
Repeating a common refrain among major oil companies in Alaska, Kruger said the state needs to establish “predictable and durable” tax and other fiscal terms to support a pipeline.
“Now is the time to demonstrate leadership and take action in Alaska in support of the pipeline project,” he said.
He cited the example of Qatar in the Middle East. ExxonMobil is partnering on a giant liquefied natural gas project there based on “Qatar’s investment policies and durable fiscal terms,” Kruger said.
On Point Thomson In recent years, ExxonMobil and the state of Alaska have been locked in a court battle for control of Point Thomson, a large gas field on state land along the Beaufort Sea coast east of Prudhoe Bay. Other leaseholders there include BP, Chevron and ConocoPhillips.
The court fight began after the state, tired of waiting for development of the field, terminated the Point Thomson unit and declared the underlying leases expired.
Amid the litigation, state officials gave ExxonMobil permission to drill on two leases, and a drilling contractor has reached total depth on the first well, Kruger told the Alliance audience.
“This well reaches out horizontally from the shore-based rig to a subsurface target nearly two miles offshore,” he said.
ExxonMobil has said it intends to produce 10,000 barrels a day of gas condensate from Point Thomson by year-end 2014, an output lawyers for the state have characterized as “a minimal trickle of production.”
Kruger said the company is serious about pushing ahead on Point Thomson.
“ExxonMobil wants to see Point Thomson developed,” he said. “We believe it underpins the success of the Alaska pipeline project. Our commitment to achieving progress at Point Thomson is demonstrated by investments which have now topped $1 billion, including more than $300 million in the last two years.”
He added: “It is important that we resolve the outstanding issues with the Department of Natural Resources now.”
Alaska Gov. Sean Parnell, speaking just before Kruger at the Alliance conference, said he too believes it’s time to resolve the Point Thomson litigation.
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