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DNR extends Point Thomson deadline
Kay Cashman Petroleum News
On Sept. 1, Mike Menge, commissioner of the Alaska Department of Natural Resources, granted Exxon one last extension for the Point Thomson unit.
The extension, which is until Oct. 20, is the third such deferment the Murkowski administration has granted since the North Slope unit was put in default last fall by Tom Irwin, the previous DNR commissioner, and Mark Myers, who served under Irwin as Division of Oil and Gas director.
The extension gives Exxon additional time to submit an acceptable plan of development for the Point Thomson unit and file an appeal on the Sept. 30, 2005, ruling that put the unit in default. A default would put leases within the 106,201-acre unit back on the auction block.
Exxon is the operator of the eastern North Slope unit. Other working interest owners of significance are BP and Chevron.
The commissioner chose Oct. 20 because it was the day after the next special legislative session was expected to end. Gov. Frank Murkowski had earlier said he was going to call the 30-day session to get the fiscal gas pipeline contract revised and approved.
“We’re giving the Legislature one more opportunity to take whatever action they see fit regarding the gas pipeline contract,” DNR spokesman Dan Saddler told Petroleum News Sept. 1.
The proposed fiscal contract for a gas line from the North Slope negotiated by the Murkowski administration with oil and gas owners BP, ConocoPhillips and Exxon defers existing requirements for Point Thomson development as long as natural gas from the unit is committed to the gas pipeline.
With 350-450 million barrels of oil and condensate and 8 trillion cubic feet of gas, Point Thomson is the largest proven yet still undeveloped unit in Alaska.
Nov. 6 hearing next Menge told Exxon that if the Legislature did not approve the gas line contract during the special session, then the commissioner would hold a Point Thomson unit hearing on Nov. 6, giving unit operator Exxon a chance to either present an acceptable development plan to pull the unit out of default or appeal the 2005 decision that put the unit in default.
However, chances of the governor calling the special session have fallen to almost none since Menge’s Sept. 1 decision.
The deadline has already passed to call a session that would end on Oct. 19, and the governor’s top advisers say he probably won’t call a session (see related article on page 7 of this issue.), largely because legislators have indicated they do not want one.
In a recent letter to the governor, House Speaker John Harris, R-Valdez, and Majority Leader John Coghill, R-North Pole, said “We have personally spoken to a majority of the members on both sides of the aisle and the response was clear; the House does not support reconvening for a third special session.”
They said members believe there is not adequate time to make the necessary changes to the proposed contract.
“After meeting with ConocoPhillips, Exxon and BP last week, it was clear the oil companies want further concessions to offset the results of the production tax passed during the last special session,” they wrote. “It was also clear that the Legislature’s position and the oil companies’ positions are still very far apart and further concessions on both sides will be necessary.”
Conservation agency has final say Point Thomson, discovered in 1977, is a high-pressure condensate field east of Prudhoe Bay on the western edge of the Arctic National Wildlife Refuge. Up until Exxon filed its 22nd plan of development last year, it had planned to produce liquids by bringing the condensate to the surface and then recycling the natural gas by re-injecting it to maintain reservoir pressure — and to await the building of a gas pipeline from the North Slope to market.
But last year Exxon said recycling was not economic and that Point Thomson should produce natural gas first for a gas pipeline project.
Recent former oil and gas directors — Jim Eason, Ken Boyd and Mark Myers — disagree with Exxon, suggesting that tapping the gas first for the pipeline might be more profitable for Point Thomson owners but it’s not necessarily in the best interest of the state or the best way to produce the reservoir.
In the end, the Alaska Oil and Gas Conservation Commission will determine whether gas cycling at Point Thomson is necessary to maximize hydrocarbon recovery and if commitment of Point Thomson gas to the gas line project is premature.
AOGCC is the agency responsible for preventing waste and insuring greater ultimate recovery of oil and gas in Alaska.
This month the commission will begin evaluating Exxon’s proposed plan to develop Point Thomson first as a gas field rather than as an oil/condensate field.
In a recent white paper — i.e. statement of position — AOGCC said if the only consideration were the conservation of Alaska’s hydrocarbon resources then Point Thomson should be developed as an oil field.
“In other words, to maximize both oil and gas recovery, produced gas from Point Thomson should be injected back into the reservoir until all of the economically recoverable liquid hydrocarbons have been produced. Only then should the gas be sold,” the commission said.
But AOGCC said many other factors will — and should — be considered in reaching the best decision for Point Thomson “to maximize benefit to the citizens of Alaska.”
The commission’s evaluation of Point Thomson is expected to take eight or nine months, and possibly longer, AOGCC said in June, putting completion in April 2007 at the earliest.
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