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Vol. 23, No.37 Week of September 16, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

Pt Thomson extension

State stays 2019 date in 2012 settlement on Alaska LNG project progress

Kristen Nelson

Petroleum News

The state has stayed a deadline in its 2012 settlement with Point Thomson operator ExxonMobil Production Co.

The settlement required a plan for expansion of Point Thomson production by the end of 2019 if a major gas sale hadn’t been sanctioned by June 2016. Late last year the state and ExxonMobil reached agreement on the company’s expansion plan. The settlement required either increasing production to 30,000 barrels per day of condensate (the current facilities support 10,000 bpd, although that rate has rarely been achieved) or moving natural gas to Prudhoe Bay for injection there (requiring an agreement with the Prudhoe Bay working interest owners and construction of a gas pipeline between the fields).

Moving natural gas to Prudhoe was ExxonMobil’s choice.

That work has now been deferred.

By terms of a letter agreement dated Sept. 10, the Alaska Department of Natural Resources, ExxonMobil and BP (a major Point Thomson working interest owner) agree that the year-end 2019 deadline has been stayed for as long as the Alaska LNG Project is progressing. The extension ends when the Alaska LNG Project reaches final investment decision or when DNR notifies the parties that the project is no longer progressing.

At the end of the extension the Point Thomson owners will have 30 months to reach a final investment decision on either of the expansion projects or lose acreage in the field.

“The agreement continues to demand that our resources at Point Thomson are developed to the maximum benefit of all Alaskans, and also aligns the state and industry in a new way as the Alaska LNG Project advances,” DNR Commissioner Andy Mack said in a statement. “We are committed to development of this critical resource, and this agreement keeps us on track.”

Gas sales agreement

Also Sept. 10, the Alaska Gasline Development Corp. announced that ExxonMobil and AGDC had agreed to what the corporation called “certain key terms including price and a volume basis for a Gas Sales Agreement,” captured in a “Gas Sales Precedent Agreement” signed Sept. 10.

AGDC and BP agreed to key terms of a gas sales agreement, including price and volume, on May 4.

AGDC has not reached agreement with ConocoPhillips - the other major North Slope leaseholder, a company with natural gas interests at both Prudhoe Bay and Point Thomson.

In a Sept. 10 statement on the ExxonMobil agreement AGDC said the parties anticipated finalizing long-term gas sales agreements for ExxonMobil’s share of both Prudhoe Bay and Point Thomson gas. ExxonMobil has a 62.75 percent share of Point Thomson and a 36.4 percent share of Prudhoe Bay.

“This precedent agreement is good for Alaska and ExxonMobil and represents a significant milestone to help advance the state-led gasline project,” said ExxonMobil Alaska President Darlene Gates. “As the largest holder of discovered gas resources on the North Slope, ExxonMobil has been working for decades to tackle the challenges of bringing Alaska’s gas to market,” she said.

“The Alaska LNG project has made meaningful progress over the past year,” said AGDC President Keith Meyer. “We have secured the customers, we have advanced the project with regulators, and now we have ExxonMobil’s Gas Sales Precedent Agreement executed.”

Alaska Gov. Bill Walker said: “This agreement means Alaska is one step closer to monetizing the North Slope’s vast and proven natural gas resources. I am pleased with the engagement and alignment from ExxonMobil for the Alaska LNG project.”

Alaska’s congressional delegation welcomed the announcement of the gas sales precedent agreement.

“This is a positive step in our state’s efforts to build a new pipeline that will allow us to commercialize the North Slope’s prolific natural gas resources,” the delegation said in a Sept. 12 statement. “While we recognize that much work remains to be done, we’re pleased to see the state using its authority and leverage under the Point Thomson settlement of 2012 to help move forward on this major infrastructure project.”

The delegation, all Republicans, includes Congressman Don Young and Sens. Lisa Murkowski and Dan Sullivan.

Agreement details

The Point Thomson Unit Letter Agreement said that for purposes of the settlement agreement an Alaska LNG Project means a fully integrated natural gas project producing LNG for export and natural gas for in-state delivery being advanced by the state, a state-owned entity such as AGDC “or an entity in which a State owned entity holds a controlling equity share.”

The letter agreement says the June 30, 2017, plan of development for Point Thomson, as supplemented in October of that year and approved in August and December 2017, will remain in effect until the effective date of a major gas sale POD, an expansion project POD or Dec. 31, 2019, “if an MGS POD or Expansion Project POD has not been submitted.”

The agreement calls for submittal of Point Thomson PODs on a biennial basis beginning with the 2020-21 period. Those PODs would address initial production system work or other exploration or development, including activities in support of the Alaska LNG Project.

On the extension period, a final investment decision is defined as “a decision by the Alaska LNG Project owners to construct the Alaska LNG Project, following securing the necessary financing arrangements to construct and operate the Alaska LNG Project.”

The agreements notes that the Point Thomson unit working interest owners “have invested about $4 billion in Point Thomson - more than 70 percent of that in Alaska.”

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