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Exxon discussing major expansion at Point Thomson State says commitments in draft application unlikely to win state approval; lack of commitment to produce unit cited Kristen Nelson PNA News Editor
Exxon Mobil Corp., operator of the Point Thomson unit, is discussing with the state the possibility of expanding the unit, whose 17th plan of development was approved by the state in August.
In response to a draft application for expansion of the unit from ExxonMobil on behalf of itself and working interest owners BP Exploration (Alaska) Inc. and Chevron USA Inc., the Alaska Department of Natural Resources Division of Oil and Gas told ExxonMobil that no decision on expansion can be made until ExxonMobil makes a formal application and that application is noticed for public comment.
“If the major Point Thomson unit owners want to maximize their chances of having an expansion application approved,”division Director Ken Boyd said in an Oct. 24 letter in response to the draft application, “it would be helpful if they incorporated all available seismic and well data over the unit and expansion area into a common database, made a firm commitment to delineate the recoverable resources in the expansion area, and made a firm commitment to produce.”
Boyd noted that the Point Thomson unit “has operated under a plan of development for over 23 years, yet there are still no plans to produce.”
ExxonMobil's draft application for expansion, dated Sept. 26, proposes adding approximately 64,000 acres, “all or portions of 18 additional leases”to the unit. Portions of three leases, approximately 3,340 acres, would be contracted out of the unit. Data would be acquired In the draft application, Exxon Mobil said that the owners would acquire “sufficient seismic data over the expansion tracts to allow adequate technical evaluation and 'right-sizing' of the Thomson reservoir on the western side”of the unit. The technical evaluation of data would be completed and reviewed with the state within two years after the expansion of the unit.
ExxonMobil said the Point Thomson owners believe that expansion of the unit will promote conservation of natural resources, prevent economic and physical waste and provide for the protection of all interested parties, including the state of Alaska, while allowing drilling operations in the unit to be optimized and surface impacts to be reduced.
In the state's response, Boyd said: “Exxon will need to elaborate on how an expansion of a unit that has never produced and has no plans to produce in the foreseeable future will meet these goals. Particularly, how does the proposed expansion protect the state of Alaska?”
In its approval of the 17th plan of development, Boyd noted, the state said that unit “owners should be prepared to discuss work commitments in conjunction with any proposed unit expansion”and to provide copies of technical data supporting the redefined boundaries for review prior to an August meeting to discussion expansion.
He noted that the division had not yet received exhibits from the August technical presentation. And, he said, rather than coming away from the August meeting on the proposed expansion agreeing with the owners that expansion should be considered, “the division requested justification for retaining all of the area currently within the PTU.” Concerns same as in 1980s “The expansion area is larger than we anticipated and the work commitments fall short of our expectations when we approved the 17th POD,”Boyd said. He noted that the majority of acreage now proposed for inclusion in the Point Thomson unit was committed to the unit in the first expansion, approved in 1984. At that time, because the state was concerned that geologic data did not support including some areas in the first expansion, the Point Thomson owners agreed to two drilling commitments, with contraction provisions if those commitments were not met. Most of that early expansion area was contracted out of the unit because wells were not drilled.
“It appears,”Boyd told ExxonMobil, “that DNR's concerns with the current draft application are the same issues that DNR faced with the first expansion application 16 years ago: a common database, geologic justification for including the expansion area in the PTU, and firm commitments to explore the expansion area and develop the unit.”
He also said that while the Point Thomson owners agreed to drilling commitments and contraction provisions in that first expansion in 1984, they did not include similar commitments in the present draft application.
“In addition, there are currently no plans to begin production from the PTU,”Boyd said. In 1985, Exxon told the state that: “current plans call for establishment of a participating area and start-up of production for a gas cycling/condensate recovery development as early as 1992.”
“Exxon's expectations appear to be diminishing,”Boyd said, and concluded that “it appears doubtful that it would be in the public interest to approve the draft application, but again a decision can not be made until the owners have submitted a formal application with all supporting materials, and the application is noticed for public comment.”
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