October 03, 2005 --- Vol. 11, No. 77October 2005

State rejects plan for Point Thomson, declares unit in default

The Alaska Division of Oil and Gas has rejected ExxonMobil’s 22nd plan of development for the Point Thomson unit and found the unit in default “for Exxon’s failure to submit an acceptable unit plan of development.”

“Continuing this 30-year record of non-development and delay of an oil and gas lessee’s obligations to develop and produce its oil and gas leases makes a mockery of the statutory, regulatory and contractual protections for the State as owner of the oil and gas estate. Therefore, the 22nd POD is unacceptable,” Division Director Mark Myers said in a final decision issued Sept. 30.

The 22nd plan of development for the eastern North Slope unit was rejected because it “makes no commitment to timely develop and produce PTU oil, gas, or gas condensate,” he said. Since the unit agreement for Point Thomson requires an approved unit plan, the unit was in default Oct. 1.

Unit operator ExxonMobil has 90 days — until Dec. 29 — to submit an acceptable plan of development, which “must contain specific commitments to timely delineate the hydrocarbon accumulations underlying the PTU and develop the unitized substances,” including: plans to bring the Thomson sand reservoir into commercial production; plans to explore, delineate and produce “other hydrocarbon accumulations and lands that lie stratigraphically above or below” the Thomson sand; sanctioning of a commercial Point Thomson development project by Oct. 1, 2006, and providing the division “with evidence of corporate approval and commitment of project funding.”

An acceptable plan would include beginning commercial production from Point Thomson by Oct. 1, 2009; and provision of details of operations to fulfill the 2006 development drilling commitment. Failure to fulfill the 2006 drilling commitments would result in contractions of acreage added to the unit in 2001 and payment of the agreed-upon fines to the state.

Development operations are required to begin by Oct. 1, 2007, and the Point Thomson unit owners “shall have an opportunity for hearing regarding this notice to modify the rate of PTU development.” Myers said the division would contact Exxon to schedule a hearing on the issue, “which will be held not less than 30 days from the date of this decision.”

The leases with wells certified as capable of production in paying quantities are required to be in production by Oct. 1, 2009.

There is a 20-day appeal period for the decision.

Editor’s note: See story in Oct. 9 issue of Petroleum News.

Petroleum News - Phone: 1-907 522-9469
[email protected] ---