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Point Thomson owners to focus on gas project Alaska arguing for complete evaluation of resource base at eastern North Slope unit in 2004-05 work plan Kristen Nelson Petroleum News Editor-in-Chief
The state of Alaska’s Division of Oil and Gas and the Point Thomson unit owners appear to be at odds over what the work focus should be at the unit over the next year.
There is no production at Point Thomson, which sits at the eastern edge of state lands on the North Slope, with leases adjacent to the Arctic National Wildlife Refuge. Because of an old agreement with the state of Alaska, original Point Thomson leases have been extended beyond their basic terms, awaiting a pipeline to connect the unit to the trans-Alaska pipeline at Prudhoe Bay. Major owners at Point Thomson are ExxonMobil, BP Exploration (Alaska), Chevron U.S.A. and ConocoPhillips Alaska.
A recent unit expansion, however, requires development drilling by June 2006 or the expansion leases revert to the state and a substantial fine — $20 million —is due to the state to reimburse it for money it could have earned reoffering the expansion leases, those not held by the original agreement which delayed a production requirement until a pipeline was in place.
The owners submit a plan of development to the state each year, along with an update on the previous year’s work. Owners want to focus on gas sales A draft unit work plan for the upcoming year, October through September, submitted by Point Thomson operator ExxonMobil, proposes that 2004-05 work focus on “technical and commercial evaluations necessary to assure that the owners will be in a position to participate in any future open season for major gas sales from the North Slope of Alaska.”
Specific work would include developing “a conceptual gas sales depletion plan,” conducting “screening evaluations of Point Thomson gas sales production facilities” and doing any work necessary to support ongoing negotiations under the Alaska Stranded Gas Development Act. Why the focus on gas? The owners had been working on a plan to produce the high-pressure condensate at Point Thomson, separate out and ship the liquids, and reinject the gas. Work was begun on a federal environmental impact statement, but that work and permitting activities were suspended in the third quarter last year when the owners concluded that they could not “identify a viable gas injection project under current fiscal terms.”
The cost for producing and reinjecting the high-pressure condensate was too great.
The owners tried to identify a smaller gas injection project which would be viable, “in light of a smaller condensate resource,” and although “significant” cost reduction potential was identified, the reductions were not enough to make a gas injection project viable, “and further engineering work on the resulting cost reduction case … was suspended,” the companies said in their review of the 2003-04 work plan.
The Point Thomson owners reviewed confidential cost data with the Department of Natural Resources in April and May. State wants other alternatives studied The Department of Natural Resources made substantial changes in the Point Thomson owners’ draft proposal. A final plan proposal was not available as Petroleum News went to press July 8.
The state added work to the draft proposal.
It does not want the owners to focus solely on a gas sales project, but wants them to “evaluate all potential resources within the unit area to develop a comprehensive unit plan.”
In addition to work on the Thomson sand condensate resource, the state wants the owners to do “reserve estimates and risk assessments for Brookian and Pre-Mississippian” prospects and to incorporate that potential into the unit’s reservoir model.
And the state wants the Point Thomson owners to evaluate “other development alternatives (for the Point Thomson sand), such as initial partial blowdown followed by limited or full gas cycling,” alternatives for reservoir pressure support and affect of blowdown timing on ultimate recovery.
And, where the owners asserted in the plan that they have the capability and experience to develop and operate the Point Thomson unit “and its associated technical challenges,” the state inserted the words “to overcome” in the sentence, so it reads: “The Point Thomson owners possess both the capability and North Slope experience necessary to develop and reliably operate the Point Thomson unit and to overcome its associated technical challenges.”
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