NOW READ OUR ARTICLES IN 40 DIFFERENT LANGUAGES.
HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PAY HERE

SEARCH our ARCHIVE of over 14,000 articles
Vol. 10, No. 48 Week of November 27, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Pt. Thomson deferred

New DNR chief accedes to request from Exxon, owners to work on gas sales

Kristen Nelson

Petroleum News Editor-in-Chief

Commissioner Mike Menge of the Alaska Department of Natural Resources has granted a request from Point Thomson unit operator ExxonMobil Production giving the company until May 31, 2006, to appeal an October decision finding the unit in default, and granting a six-month extension for beginning development drilling at the field.

A September decision, amended in October, by former Natural Resources’ Division of Oil and Gas Director Mark Myers, denied an ExxonMobil request for an extension of the beginning of drilling. That date, based on commitments from the last expansion of the unit, required ExxonMobil to begin development drilling by June 15, 2006, in exchange for the state’s agreement to an expansion of the unit.

At the time of the expansion the unit owners planned to develop Point Thomson as a gas cycling project, taking off condensates, selling those liquids down the trans-Alaska oil pipeline and re-injecting the gas. Re-injection at Point Thomson would be costly because the reservoir is highly pressurized. The companies later determined that economics were not favorable for a gas cycling project — a determination that Myers said was premature because it lacked information that a well drilled this winter would provide.

Tied into gas line

Based on their determination the companies then proposed to the state to tie Point Thomson development into gas sales, dependent on the existence of a gas pipeline from the North Slope to market, and said a change in the state’s tax policies would also be required.

Former DNR Commissioner Tom Irwin was dismissed Oct. 27 and Menge, who had been the governor’s senior advisor on energy, mining and the environment, was named as his replacement.

The issue of contention was the administration’s negotiations with BP, ConocoPhillips and ExxonMobil, the major North Slope natural gas owners, over fiscal terms for a North Slope gas pipeline. In a memo to Attorney General David Márquez prior to his dismissal Irwin listed his concerns and asked for legal advice. One of his concerns was conflicts between the proposed gas line contract and the state’s oil and gas leases, including pressure the department was under from the administration “to endorse terms governing Point Thomson development that are inconsistent with and materially weaker than” obligations to develop the field under the unit agreement.

Myers was one of six department officials who resigned in protest of Irwin’s dismissal.

Not a regulatory dictate

Alaska Gov. Frank Murkowski discussed the situation at the department, and Point Thomson, in remarks in mid-November.

He told the Resource Development Council Nov. 16 it was his job, as governor, to make “some of the tough decisions … when the rubber hits the road. And we’ve had a little rubber hitting the road on this project,” he said, referring to the gas pipeline negotiations.

The governor said “Congress and the state Legislature did not provide the tools for a regulatory dictate, but rather a negotiated business contract. Some lost sight of the objective, which is to obtain a sound contract, but not at any price.”

The governor had told members of the press earlier that week that the state lost several good people when Irwin left. Murkowski said DNR does “an awful lot of regulatory reviews,” but “we were in negotiations,” and had to achieve a contract in the interests of the state.

He also said Point Thomson was probably the most divisive issue among state negotiators. Certain commitments were made by the Point Thomson unit owners, Murkowski said, and those commitments were rolled forward in the context of the contact negotiations.

When asked about Point Thomson issues at recent press conferences the governor has said only that Point Thomson gas would be needed for the gas line. Prudhoe Bay and Point Thomson are the gas accumulations expected to provide the bulk of initial gas for the pipeline.

Myers told a meeting of the House Special Committee on Oil and Gas Nov. 21 that if Point Thomson were developed it would provide an infrastructure base on the eastern North Slope. The department has foregone an opportunity to get a well drilled there this winter, he said, referring to Menge’s recent decision. He told the committee that once companies agree to commitments the department must hold them to those commitments or undeveloped leases are simply warehoused. New companies are coming into the state and reoffering the leases would provide an opportunity for them to look at different ways of developing the field, he said.

Unit declared in default

When the division rejected ExxonMobil’s most recent plan of development in September, then Director Myers declared the unit to be in default. The Oct. 27 amended decision said the proposed plan of development was denied because it “makes no commitment to timely develop and produce PTU oil, gas, or gas condensate.”

The amended decision, also signed by Myers, triggered a 20-day appeal period to the commissioner, and gave ExxonMobil 90 days (by Dec. 29, 2005) to submit an acceptable plan of development to “cure” the default.

On Nov. 9 ExxonMobil wrote Commissioner Menge and requested an extension of the appeal time, “and of the time to cure set out in that decision, to May 31, 2006.” ExxonMobil said that during that time the unit owners “will continue with activities set forth in our plan of development necessary to progress a gas sales development” at Point Thomson. The company also requested a six-month extension of the deadlines in the 2002 unit expansion.

A two-sentence Nov. 10 response from Menge acknowledged receipt of ExxonMobil’s letter and said: “After careful consideration of the issues, I have decided to grant ExxonMobil’s requests for extensions of time set out in your letter.”



Click here to subscribe to Petroleum News for as low as $89 per year.
Notice: Only paid subscribers have access to the pdf version of this story, which carries maps and other art.

Petroleum News - Phone: 1-907 522-9469
[email protected] --- https://www.petroleumnews.com ---
S U B S C R I B E