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May 2010

Vol. 15, No. 18 Week of May 02, 2010

ExxonMobil seeks Point Thomson air permit

Company continues preparations for high-pressure gas cycling development; battle over unit’s fate awaits Alaska Supreme Court action

Wesley Loy

For Petroleum News

ExxonMobil continues to lay the groundwork for its natural gas cycling project in the Point Thomson field on Alaska’s North Slope.

Meantime, the legal fight between ExxonMobil and the state over control of the Point Thomson unit seems to have hit a lull.

On April 20, the Alaska Department of Environmental Conservation announced it was proposing to issue an air quality control “minor permit” to ExxonMobil for a two-well drilling operation at Point Thomson.

The permit is intended to regulate nitrogen dioxide pollution from a range of equipment ExxonMobil is using at Point Thomson, where the Nabors 27-E rig already has drilled at least one of the wells to depth. Other equipment covered under the air permit includes boilers, heaters, a gas flare, a waste incinerator, generators and various diesel engines.

In February, ExxonMobil said it had successfully drilled and cased the first development well at Point Thomson, the PTU-15 injector well with a measured depth of more than 16,000 feet. The PTU-16 producer well also has been at least partially drilled.

The Point Thomson field straddles the Beaufort Sea shoreline about 60 miles east of Prudhoe Bay.

ExxonMobil intends to produce gas condensate for shipment down the trans-Alaska oil pipeline.

The company has pledged to begin 10,000 barrels a day of condensate production by year-end 2014. It says the $1.3 billion project will feature at least five wells.

Laying the groundwork

The air quality permit adds to the raft of preparatory work ExxonMobil is pursing for its project, which involves unusually robust wells and other equipment to handle the extreme high pressures of the Point Thomson reservoir.

ExxonMobil says it will be the highest-pressure gas cycling operation in the world.

The U.S. Army Corps of Engineers is preparing an environmental impact statement for the project.

The Army Corps held a series of public and agency scoping meetings in January to discuss the project and take comments. The meetings were held in Fairbanks, Kaktovik, Nuiqsut, Barrow and Anchorage.

In a recent newsletter, the Corps said it received more than 300 comments on the project.

“Concerns raised in scoping focused primarily on potential effects to subsistence resources, such as access and migration patterns,” the newsletter said. “Other concerns included possible noise, as well as impacts to air and water quality.”

Environmental groups have said they believe Point Thomson’s three work pads are too close to the beach, making them vulnerable to possible erosion.

ExxonMobil has discounted the erosion threat, and says the drill sites need to be close to the water’s edge so the directional wells can reach the reservoir beneath the Beaufort Sea.

The Corps expects to release the draft EIS late this fall.

Court conflict on hold

Although ExxonMobil is now well along on the development, the work is proceeding under unusual circumstances.

The leaseholders including unit operator ExxonMobil, BP, Chevron and ConocoPhillips are fighting in court, and administratively before the Alaska Department of Natural Resources, to retain the Point Thomson unit and the underlying leases.

Beginning in 2005, frustrated state officials took steps to reclaim the Point Thomson acreage, saying the oil companies had failed to develop the field three decades after its discovery.

Despite the still unresolved legal conflict, DNR Commissioner Tom Irwin allowed ExxonMobil to start drilling in 2009. ExxonMobil executives say the drilling shows their commitment to develop Point Thomson, which holds an estimated 8 trillion cubic feet of gas — about a quarter of all the known gas reserves on the North Slope.

The court conflict has been in a holding pattern since Feb. 5, when lawyers for DNR petitioned the Alaska Supreme Court to review an unfavorable Superior Court decision.

In that ruling, Superior Judge Sharon Gleason of Anchorage reversed Irwin’s 2008 decision to dissolve the Point Thomson unit. The unit designation is important because it keeps alive a collection of old leases that would otherwise expire.

Gleason held that the Point Thomson leaseholders were wrongly denied a state hearing under a key section of the Point Thomson unit agreement. State lawyers argue no such hearing is necessary.

The Point Thomson leaseholders are urging the Supreme Court not to accept the state’s appeal.

The high court’s website has indicated for weeks now that the state’s petition is “ready for decision.”






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