THE EXPLORERS 2006 - Exxon offers 20,000 Point Thomson acres

Petroleum News

The long-simmering disagreement between the State of Alaska and the Point Thomson unit owners over development of the field might — or might not — be moving toward resolution.

The state has been trying to get the owners to develop the eastern North Slope high-pressure condensate reservoir for some three decades, with negotiations centered around state approval of plans of development and periodic expansions and contractions of the unit’s acreage. Central to the problem is the lack of a pipeline to move oil to the trans-Alaska pipeline and lack of a gas pipeline from the North Slope.

Negotiations broke down in September 2005, and the unit was declared in default based on the state’s determination that the proposed 22nd plan of development did not “provide for the reasonable delineation and timely development of the hydrocarbon accumulations in the unit area.” The unit operator, ExxonMobil Production, was given 90 days to “cure the default.”

The deadline for a cure was extended to coincide with the expected conclusion of a fiscal contract between the state and BP, ConocoPhillips and ExxonMobil for a North Slope gas pipeline project.

When it became evident that the Alaska Legislature would not approve a contract by the latest deadline, Oct. 20, 2006, Exxon proposed settling outstanding issues with a payment of $20 million and surrender of 20,000 acres. It also submitted a new development plan.

(See full story in the Oct. 29 issue of Petroleum News online at www.PetroleumNews.com.)

The new plan is for five years, and includes a well to be drilled into the Thomson Sand reservoir in 2009-10, or a $40 million penalty payment if the well is not drilled, unless force majeure or permitting delays prevent drilling.

The Department of Natural Resources has a Point Thomson hearing scheduled for Nov. 13 and said the commissioner will have no response to the proposal until the process of gathering information, holding a hearing and considering all the evidence in the matter is complete.

Some of the acreage proposed for surrender is in expansion areas, although only a portion of the 2002 expansion area would be surrendered under the Exxon proposal. Some areas of the pre-2002 unit on the west, south and northeast are offered for surrender. Large areas were added to the unit in 2002 on the north and northwest, and only portions of those tracts are on the surrender list.