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Vol. 16, No. 11 Week of March 13, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

BP, Conoco feel left out

ExxonMobil, state wage private talks over Alaska’s disputed Point Thomson field

Wesley Loy

For Petroleum News

The state and ExxonMobil are continuing negotiations to try to settle the legal dispute over Alaska’s Point Thomson oil and gas field.

But dissension has emerged among the field’s major stakeholders, with BP and ConocoPhillips recently complaining they’ve been shut out of the negotiations.

Another owner, Chevron, lodged a similar complaint back in January.

ExxonMobil is the largest stakeholder and the designated operator for Point Thomson, a nonproducing field located along the Beaufort Sea coast next to the western boundary of the Arctic National Wildlife Refuge.

The companies are fighting state efforts to take away their leases and dissolve the Point Thomson unit. Alaska officials are trying to reclaim the state acreage because of a lack of production from the field, discovered in 1977.

Over the years, ExxonMobil has cited technical challenges and the lack of a North Slope natural gas pipeline as primary reasons why the field hasn’t been developed.

The Point Thomson dispute involves the highest of stakes. The field holds billions of dollars worth of natural gas and petroleum liquids, and some industry observers believe the planned gas pipeline won’t work without Point Thomson reserves.

More time requested

At the moment, the Point Thomson legal battle sits before the Alaska Supreme Court, to which the state appealed after an adverse Superior Court ruling in January 2010.

On March 7, the state and ExxonMobil filed a joint request with the high court asking that the case be stayed for 60 days while they continue settlement discussions. It’s the fourth time the two sides have asked for a timeout in the proceedings so they could concentrate on trying to settle the Point Thomson dispute out of court.

Two companies, BP Exploration (Alaska) Inc. and ConocoPhillips Alaska Inc., are taking issue with the latest timeout request.

While the two firms say they’re supportive of trying to reach a settlement, they complain that ExxonMobil and the state have closed them out of the negotiations.

“BPXA has not given ExxonMobil authority to negotiate on its behalf,” lawyers for BP said in a March 7 filing with the Supreme Court. “BPXA has asked to participate and has asked to see draft settlement documents that it has been told have been exchanged, but the State and ExxonMobil have refused to share the documents or to allow BPXA to participate in the negotiations.”

The company said it doesn’t support a further stay of the case unless all of the working interest owners in Point Thomson “are allowed to participate meaningfully” in the negotiations and to review copies of proposed settlement agreements.

BP further noted that it holds a 32 percent ownership interest in the Point Thomson unit, nearly as much as ExxonMobil’s 37 percent.

Sullivan has mail

In its court filing, BP supplied a copy of a Jan. 24 letter it sent to Dan Sullivan, commissioner of the Alaska Department of Natural Resources.

The letter, signed by BPXA’s chief financial officer, Claire Fitzpatrick, said BP was aware that the DNR had recently provided ExxonMobil a “revised draft” of a proposed Point Thomson unit settlement agreement.

“Our counsel has asked for a copy of that document, but has not yet heard back regarding that request,” the Fitzpatrick letter said.

The letter to Sullivan continued: “Because we have been excluded from the negotiations, BPXA does not have a full understanding regarding the terms and conditions of the proposed PTU settlement. Although ExxonMobil shared a copy of a draft ‘term sheet’ with us in late 2010 and met with us earlier this month, the State has rejected BPXA’s joint effort with Chevron to meet in order to more fully understand your perspective about the contents of that ‘term sheet’ and to date has rejected our requests to provide us a copy of the draft agreement. We find this unacceptable.”

Fitzpatrick added that “BPXA’s support and approval will be required for any successful PTU settlement.”

ConocoPhillips also objects

ConocoPhillips, in its own March 7 filing with the Supreme Court, registered many of the same complaints as BP. ConocoPhillips said it holds a 5 percent ownership interest in Point Thomson unit leases.

“ConocoPhillips has been excluded from the settlement discussions,” the company filing said.

ConocoPhillips also sent a letter to Commissioner Sullivan, and provided a copy to the court. The Feb. 7 letter, signed by Bijan Agarwal, ConocoPhillips Alaska vice president of commercial assets, said the company was aware that ExxonMobil and the state had been negotiating settlement of “various disputes and litigation” relating to Point Thomson, but that ConocoPhillips hadn’t been invited to participate in any negotiations over the last year.

“Please be advised that ExxonMobil is not authorized to represent the interests of ConocoPhillips” in the litigation, Agarwal’s letter said.

As of press time, the Supreme Court had not yet ruled on the request for another 60-day stay of the case proceedings.

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