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State, Exxon reach agreement on Point Thomson expansion plan
Kristen Nelson Petroleum News
The state and ExxonMobil have reached agreement on the company’s expansion plan of development for the Point Thomson unit. In August the state accepted the company’s POD for the initial production system but rejected the expansion project plan.
In an Aug. 29 letter rejecting the expansion project planning portion of the POD, Division of Oil and Gas Director Chantal Walsh cited conditions which ExxonMobil discussed for moving ahead with expansion project planning and also a lack of details.
The expansion plan proposal includes building facilities, including a gas pipeline, to allow shipment of Point Thomson natural gas to Prudhoe Bay for injection there, and would also result in increased condensate production from Point Thomson. Expansion is a requirement of the settlement the Point Thomson unit owners reached with the state in 2012 which requires an expansion plan if a major gas sale has not been sanctioned by June 2016. The settlement includes options of either increasing to 30,000 barrels per day of condensate or - the option in the current expansion plan - by moving natural gas to Prudhoe Bay for injection there.
Clarification Cory Quarles, ExxonMobil Production Co.’s Alaska production manager, provided an extensive response to the division in an Oct. 12 letter that he described as “clarification and explanatory information in response to issues raised” by Walsh.
In a Dec. 22 approval of the revised expansion project planning POD, Walsh said the Oct. 12 letter provided new information supplementing the original POD and said the October letter “represents an amendment” to the proposed POD. It is this amended planning POD which the division has accepted.
Walsh said the division’s “primary concern” with the initial planning POD “was that it conditioned planning work on a commercial agreement and a decision to fund,” citing numerous uses of conditional language in the original planning POD.
Walsh said that in a July 12 technical meeting ExxonMobil representatives “confirmed that it intended the Planning POD to be conditional, stating that Exxon would not proceed with Expansion Project Planning work unless the Working Interest Owners first entered a commercial agreement with the Prudhoe Bay Unit working interest owners and also decided to fund the work." WIO authorization In the revised planning POD ExxonMobil told the state it does not condition all planning work on Prudhoe Bay unit owners agreeing to delivery of gas to Prudhoe, and said engineering and permitting work is ongoing. Walsh said this was “very different” from language in the original submittal, and statements the company made to the division.
In its revised planning POD ExxonMobil said the Point Thomson unit operating agreement requires that Exxon obtain authorization from the working interest owners and said it has obtained authorization for work through the end of 2017.
The company said it had not received all necessary approvals for work required through a projected decision point at the end of 2019, and clarified the status of owner approvals and the process for receiving those approvals.
“This merely describes typical industry practice,” Walsh said in the Dec. 22 letter. “Noting the current status of Working Interest Owner authorizations is very different from the language in the initial POD, which indicated that Exxon would only complete planning work ‘if funded,’” Walsh said.
Walsh said under the revised planning POD ExxonMobil commits to proposed planning work, and if Point Thomson WIO do not fund the planning work, or if there is no commercial agreement reached with the Prudhoe WIO, “those events will not in any way absolve Exxon from fulfilling its obligation to complete the planning work promised in the Revised Planning POD.”
Planned activities The potential expansion would increase production to more than 50,000 barrels per day of condensate (up from the facilities’ current capacity of 10,000 bpd) and 920 million cubic feet per day of natural gas which would be shipped to Prudhoe Bay and injected there. Current production of natural gas is 200 million cubic feet per day which is reinjected to maintain pressure in the Point Thomson reservoir.
Two new production wells would be drilled from the central pad under the proposed expansion plan, and two wells, PTU 15 and PTU 16, would be converted from injectors to producers. A disposal well would also be drilled.
In the approval letter Walsh noted five expansion project activities proposed for 2017-2019: negotiating a commercial agreement to inject gas into the Prudhoe Bay unit; discussing technical alignment and scope with the Prudhoe working interest owners; FEED (front-end engineering and design) planning and execution; development of applications for federal and state permits; and preparing unspecified “deliverables.”
Reactions to approval The Walker administration was pleased with the decision, announcing it with a Dec. 22 press release which said the state “has approved ExxonMobil’s plan to engineer the expansion of the Point Thomson project on the North Slope,” and calling it “a positive step to achieve major gas sales and increase oil production.”
Gov. Bill Walker noted that the Alaska LNG Project has recently “been endorsed by the Trump Administration and the Chinese government.”
“Our approval of the Point Thomson to Prudhoe Bay pipeline plan adds to the momentum of the Alaska LNG Project and demonstrates the commitment of the Point Thomson working interest owners to move gas from Point Thomson into Alaska Gasline Development Corp.’s 800-mile pipeline,” Walker said, referring to AGDC’s proposal for AKLNG, which includes a gas treatment plant on the North Slope, an 800-mile gas pipeline to Cook Inlet and a liquefaction facility at Nikiski. Liquefied natural gas would be shipped from Nikiski, with AGDC and the state targeting Asian markets.
“It’s clear that ExxonMobil is committed to commercializing North Slope gas, particularly from Point Thomson. This helps align the company’s work in Alaska with the State of Alaska and AGDC,” said Department of Natural Resources Commissioner Andy Mack.
ExxonMobil said in a statement: “The preferred future development for the Point Thomson resource is through a major gas sales project, and ExxonMobil remains committed to making our natural gas available to the State’s LNG project through bilateral negotiations of mutually agreed terms. However, as stated in the Expansion Planning POD and consistent with the Settlement Agreement, ExxonMobil is evaluating gas injection into Prudhoe Bay as an alternative pending working interest owner approval.”
- KRISTEN NELSON
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