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Vol. 15, No. 35 Week of August 29, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Exxon plans pipeline

Twenty-two mile line would deliver Point Thomson liquids to Badami

By Wesley Loy

For Petroleum News

ExxonMobil is moving forward with its plans for the Point Thomson project, applying for a right-of-way lease for construction of a pipeline to carry liquids production from the remote field on Alaska’s eastern North Slope.

PTE Pipeline LLC, a Houston-based affiliate of ExxonMobil Pipeline Co., submitted the application on July 23 to the Alaska Department of Natural Resources.

The 22-mile pipeline would link the ExxonMobil-operated Point Thomson field, now under limited development, to the existing Badami unit pipeline, which connects further west to the Endicott pipeline that will soon be once again delivering Badami production to central North Slope facilities for processing and transport down the 800-mile trans-Alaska oil pipeline. (See related article on this page.)

The right-of-way application says the 12.75-inch Point Thomson pipeline will cost about $80 million to build, with annual operating and maintenance costs of $12 million. Construction is to begin in late 2011 with completion projected for 2014.

The pipeline will begin at the Point Thomson central pad and will end on a new gravel pad at Badami. It will cross state land along the Beaufort Sea coast, and will be elevated above ground on vertical support members. The line is designed for a throughput of 70,000 barrels per day.

The pipeline will feature increased wall thickness in areas where a high potential exists for accidental bullet strikes from North Slope hunters.

“The estimated commercial life of the pipeline is 30 years,” the application says.

On another front, the U.S. Army Corps of Engineers is preparing an environmental impact statement for the Point Thomson project.

Point Thomson production

ExxonMobil has drilled two wells at Point Thomson, and has said it intends to begin production of 10,000 barrels a day of natural gas condensate by year-end 2014.

Ultimate control of the Point Thomson field, however, remains the subject of a legal struggle between ExxonMobil and other major leaseholders and the state of Alaska.

David Eglinton, an ExxonMobil spokesman in Houston, said he was unable to provide any update on current Point Thomson activities.

But a Petroleum News source said the two wells have been tested, and the results were favorable.

The capacity of the pipeline obviously is several times greater than the initial production level ExxonMobil has stated.

But ExxonMobil managers have said in the past that they hope to expand production from Point Thomson. And state officials have said they certainly expect more than 10,000 barrels a day from a field estimated to hold hundreds of millions of barrels of petroleum liquids.

Mike Thompson, state pipeline coordinator with DNR, told Petroleum News on Aug. 25 that for purposes of securing a right-of-way lease the capacity of the pipeline really doesn’t matter.

However, he noted that the pipeline will operate as a common carrier. So extra capacity in the line would be available to other producers, he said.

There are currently no developed fields near Badami or Point Thomson.

Legal conflict

Aside from operator ExxonMobil, other major leaseholders at Point Thomson include BP, Chevron and ConocoPhillips.

The companies are locked in a legal conflict with the state, which took steps beginning in 2005 to break up the Point Thomson unit and invalidate the underlying leases on grounds the companies had taken too long to develop Point Thomson. The field was discovered in 1977.

Even though its hold on the field is clouded, ExxonMobil drilled the two wells with permission from DNR Commissioner Tom Irwin. ExxonMobil and the state are believed to be engaged in ongoing settlement talks.

At the moment, leaseholder legal efforts to preserve the unit are sitting before the Alaska Supreme Court, which agreed to take the state’s appeal of Superior Court Judge Sharon Gleason’s Jan. 11 ruling that nullified Irwin’s unit termination.

Supreme Court records indicate the due date for the state’s initial legal brief has been extended to Nov. 1.

—Kay Cashman contributed

to this report

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