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Point Thomson owners want production flexibility Owners say one well would not be economic under DEC’s proposed conditions for McCovey Kristen Nelson PNA Editor-in-Chief
Thomson (ExxonMobil, BP and Chevron) have told the state they are not willing to commit to sustained commercial production from the unit by 2008, because they want “the flexibility to either independently develop Point Thomson for gas cycling, while maintaining the ability to sell gas at a later date, or provide for early gas sales should that be the most advantageous development option for both the state and the owners.”
The state proposed “sustained commercial production by 2008” in a May 1 response to an expansion-contraction proposal for the unit. In a June 19 response, the owners told the state they want to “unambiguously demonstrate our commitment to the development” of Point Thomson, and will pursue an expedited permitting process and accelerate the start of preliminary engineering.
These work commitments, the owners said, “will require an estimated expenditure of $35 million over the period September 2001 to September 2003.” In addition, the owners would drill a Thomson sand appraisal well or deepen the Red Dog well in the winter of 2002-2003, for an estimated total of $50 million to be spent over the two years beginning this September. The major working interest owners at Point Development drilling by 2006 The owners would also commit “to begin continuous development drilling by mid-2006, estimated to cost in excess of $300 million,” if preliminary engineering confirms that the project is commercial and “should we be successful in receiving permits that do not contain stipulations that are prohibitive.”
The owners said they have agreed with the state to have an understanding of terms in place by June 30, with a final decision by the state no later that July 31, “so as to ensure that no proposed expansion leases expire prior to a final decision on expansion.” An 18th plan of development will be submitted by July 16.
In general, the owners told the state, they disagree with the state’s proposal to raise royalty rates for expansion tracts.
The owners also propose that continuous Thomson sand development drilling may be delayed as agreed between the state and the owners. As an example, the owners said, such a delay in development drilling of the Thomson sand might be beneficial to both the state and the owners if early gas sales from Point Thomson “were of strategic importance to commercializing North Slope stranded gas.” Concern about permit stipulations For work area B, northwest of the existing Point Thomson unit, a well would be required from an offshore location.
“Based on the McCovey drilling stipulations,” the owners told the state, “it is the opinion of the owners that it will not be possible to get a permit for this well that will allow it to be economically drilled.”
Nonetheless, the owners said, they would stand by their commitment to drill a well during the 2004-2005 winter season or make a payment of $250,000 and surrender the leases.
The owners also told the state that should that acreage expire, they “assume that the state will require any subsequent lease owner in this area to drill a delineation well in this area before approving any unit expansion in this area.”
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