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Exxon seeks expedited pipeline approval In application to Alaska regulators, company stresses tight schedule for building 22-mile line to carry Point Thomson condensate Wesley Loy For Petroleum News
In a further sign that Alaska’s long-undeveloped Point Thomson field really is headed for first production, ExxonMobil is asking state utility regulators for authority to build and operate a 22-mile pipeline for its promised gas cycling project.
The company wants “expedited consideration” from the Regulatory Commission of Alaska, stressing that it faces a tight seasonal construction schedule to meet its target of commencing production from Point Thomson by the winter of 2015-16.
The pipeline would carry hydrocarbon liquids known as condensate west to the nearest existing pipeline at the Badami field. From there, the condensate would flow into the 800-mile trans-Alaska oil pipeline.
An ExxonMobil affiliate, PTE Pipeline LLC, on July 17 filed an application with the commission for a certificate of public convenience and necessity for the new pipeline. PTE was established to build and operate the Point Thomson Export Pipeline.
In its application, PTE “respectfully requests” that the commission issue the certificate by Nov. 30, so construction can begin right away.
A long time coming The Point Thomson field, located on state land along the Beaufort Sea coast about 60 miles east of Prudhoe Bay, is rich in natural gas as well as oil. But it has gone undeveloped for more than 30 years after its discovery.
In March, ExxonMobil and the state reached a landmark legal settlement that laid out a schedule for starting development at Point Thomson.
ExxonMobil is now working on multiple fronts to make construction arrangements and to obtain all the necessary permits and other regulatory approvals.
The company’s initial development will involve cycling gas to collect condensate, a liquid that can be piped like oil. Production will start at 10,000 barrels a day, a modest volume considering that overall North Slope oil production approaches 600,000 barrels a day.
But ExxonMobil says developing the complex, high-pressure Point Thomson reservoir will take billions of dollars.
The pipeline alone is a big investment. Estimated costs total $253 million, including $18 million for materials, $190 million for construction and $45 million for contingency, PTE told the regulatory commission.
Annual operating and maintenance costs are estimated at $45 million.
Tight schedule Under the agreement with the state, ExxonMobil says it is obliged to put Point Thomson into production by the winter season of 2015-16.
To make that goal, ExxonMobil says it must take full advantage of the three upcoming winter construction seasons.
In its certificate application, PTE notes that Point Thomson is remote, without road access. Construction materials must be brought in by coastal barge in summer, when Beaufort Sea waters are open, or by ice road in winter. Most construction must take place in winter to avoid damaging the delicate tundra.
To support construction this coming winter, ExxonMobil wants to build a 50-mile ice road to Point Thomson from Endicott, the easternmost point that gravel road reach.
“Construction of the ice road is a massive, multi-million dollar undertaking which must be started as early in the season as possible and completed before any actual pipeline construction can begin,” PTE’s application says. “It would be commercially impractical to undertake construction of the ice road without permits necessary to initiate later pipeline construction activities. The Commission is respectfully requested to act on this application by November 30, 2012, in order to ensure certainty in the mobilization of the very significant resources to construct an ice road and begin construction of the pipeline. It is also important to appreciate that, given the seasonal constraints on supply and construction, loss of a part or all of a winter construction season could delay completion of the (pipeline) for an entire year.”
Experience and financial muscle Aside from the commission certificate, ExxonMobil is trying to clear a number of other hurdles to make the Point Thomson development happen.
The U.S. Army Corps of Engineers oversaw the drafting of an extensive environmental impact statement for the condensate project, and ExxonMobil is hopeful the Corps will issue a dredge and fill permit in September.
ExxonMobil also is working to secure a state right of way for the pipeline to cross state land. A decision on that also is expected in September, ExxonMobil says.
One other hurdle already was cleared when the North Slope Borough, on July 10, approved a zoning change for a portion of the pipeline route.
In seeking a certificate from the regulatory commission, PTE must show its fitness to provide service on what will be a common carrier pipeline. It points to its powerhouse parent company, ExxonMobil Pipeline Co., which nationwide transports more than 2.7 million barrels per day of oil and other products through 8,000 miles of operated pipeline, PTE’s application says.
Among ExxonMobil Pipeline’s holdings is an ownership interest in the trans-Alaska pipeline.
Its financial strength is so great, in fact, that “no financing will be required” for the Point Thomson pipeline, the application says.
It adds that the initial tariff for the pipeline is estimated to range from $15 to $20 per barrel.
Bullet-proof design The carbon steel pipeline will have a 12.75-inch outside diameter and a minimum mainline wall thickness of 0.406 inches, the certificate application says.
The line will feature increased wall thickness in areas with higher potential for accidental bullet strikes from local subsistence hunters.
As is common with the North Slope’s many above-ground pipelines, the Point Thomson line will be covered with a layer of foam insulation, as well as a galvanized metal outer jacket.
Estimated commercial life for the pipeline is 30 years.
In terms of pipeline capacity, the application says “initial configuration and capacity corresponds to the 10,000 barrels a day” of production at field startup. The pipeline has “an eventual design capacity for up to 70,000 barrels a day,” which will allow it to accommodate increased Point Thomson production, or production from elsewhere on the eastern North Slope.
“Access to the export pipeline will be provided on reasonable and non-discriminatory terms,” the application says.
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