As debate continues over Gov. Bill Walker’s plan to continue to move towards the construction of a major gas line from the North Slope for the export of liquefied natural gas, with the AKLNG project involving both the state and the North Slope oil producers coming to an end, interesting questions arise over the future of the Point Thomson gas condensate field on the Beaufort Sea coast, to the east of Prudhoe Bay.
Field development
As currently configured, the Point Thomson field is in a development stage referred to as the initial production system, or IPS, in which natural gas is being continuously cycled through the field reservoir to enable the extraction of up to 10,000 barrels per day of condensate for export along with crude oil from the North Slope. No gas is exported from the field: Gas is either recycled for condensate production or burned as fuel gas for the field facilities.
But ExxonMobil did not embark on the massive Point Thomson development just to produce 10,000 barrels per day of condensate. In fact, the condensate export pipeline from the field has a maximum capacity of 70,000 bpd. The plan has been to continue the development of the field along one of two routes: Expand the gas cycling system to produce condensate at a higher rate, or convert the field primarily to a gas field, albeit with some continuing condensate production along with the gas.
The eventual export of natural gas from Point Thomson forms a resource cornerstone of a North Slope gas line project.
A challenging field
The Point Thomson field is particularly difficult to develop, in part because of the exceptionally high reservoir pressure, and in part because it is a retrograde field in which condensate in the reservoir will tend to liquefy as the pressure is drawn down. The need for directional drilling to reach the offshore reservoir sands from onshore drilling pads compounds the difficulties.
And, although the field contains a massive hydrocarbon resource, much of this resource consists of gas, which, in the absence of a North Slope gas line, is stranded from world gas markets.
Following decades of delay in developing the field and efforts by the state to terminate the Point Thomson unit because of the lack of field development, in 2012 the state and the field’s working interest owners signed a settlement agreement, specifying terms under which the unit could be retained. That settlement agreement spelled out a commitment by ExxonMobil and the other working interest owners to move forward with the IPS development, and then to proceed with one of the two full development routes.
Terms of the settlement
The settlement agreement says that if major gas sales are sanctioned by the end of 2016, the Point Thomson working interest owners must conduct a Point Thomson development project in support of those sales. But if major gas sales have not been sanctioned by June 2016, engineering for expansion of condensate production must begin, with the possibility of exporting gas from Point Thomson for enhanced oil recovery at Prudhoe Bay being an alternative option, the settlement agreement says.
So, with June 2016 having passed, with the end of 2016 approaching, and with no decision on major North Slope gas sales in sight, what will happen to the Point Thomson field? The state has indicated that after its takeover of leadership of the AKLNG project, a decision on whether to proceed to the front-end engineering design phase of the project is unlikely before late 2018.
The state presumably still sees gas production from Point Thomson as a vital component of a major gas line project. But will the project hiatus, while the state conducts the work needed to make a FEED decision, trigger a corresponding delay in Point Thomson development?
Ultimate hydrocarbon recovery
In an application in 2015 to the Alaska Oil and Gas Conservation Commission for approval to export gas from the Point Thomson field in conjunction with the AKLNG project, ExxonMobil said that ultimate hydrocarbon recovery from the field would be approximately the same, regardless of which of the two field development routes was taken. Gas exporting would result in lower ultimate condensate production than ramped up gas recycling, but the gas production would compensate for the reduced condensate output. However, the company also indicated that intensive studies conducted in the 2000s had indicated that a major expansion of gas cycling at the field, to maximize condensate recovery, would not be economically viable.
That leaves the possibility of gas production for enhanced oil recovery on the North Slope as the alternative possibility for Point Thomson, if the North Slope gas line project does not come to fruition. For many years gas produced along with oil and re-injected into field reservoirs has underpinned continuing oil production as oil fields have aged.
The viability of using gas for ramped up enhanced oil recovery in the Prudhoe Bay field will presumably depend on some combination of future oil prices and the cost of recovering increasingly elusive pockets of oil remaining in the field.
There are other opportunities on the North Slope for the use of gas for enhanced oil recovery, including the development of major viscous and heavy oil resources in the region, and the support of oil recovery in various oil fields. However, the viability of these applications for natural gas will obviously depend on factors such as the development and production costs involved, as well as on oil prices.
Still focused on gas
Statements made by ExxonMobil indicate that the company remains intent on expanding gas production from Point Thomson.
“The Point Thomson field will provide a foundation for future gas development on the North Slope,” Hans Neidig, ExxonMobil public and government affairs manager for Alaska, told Petroleum News in a Sept. 6 email. “We are working to progress planning for a potential gas expansion concept that would be a supply source for the proposed Alaska LNG project, which is now transitioning to a state project.”
In testimony to a joint meeting of the Alaska Senate and House Resource Committees on Aug. 25, ExxonMobil Senior Commercial Advisor Bill McMahon commented that his company is committed to providing gas from Point Thomson for a state LNG project. However, before committing to new investments at Point Thomson and Prudhoe Bay in preparation for major gas sales, ExxonMobil would need robust gas sales and purchase agreements, with assurances that the purchaser would be able to receive and pay for ExxonMobil’s gas, McMahon said.
As this issue went to press, the state administration had not responded to a request for a comment on the Point Thomson settlement agreement status.
