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Point Thomson Leaseholders Offer Development Commitment

Alaska's Point Thomson leaseholders have offered the state a series of steps they will take by 2013 to develop the long-dormant North Slope oil and gas field, which the state has been trying to reclaim in court.

ExxonMobil Corp., the operator of the Point Thomson Unit, is leading the proposal, which includes BP Exploration (Alaska) Inc., Chevron U.S.A. Inc. and ConocoPhillips Alaska Inc. It commits the companies to developing the field, which was discovered 30 years ago, or lose potentially their leases.

The offer to resolve the litigation over Point Thomson would hold the companies to the unit's 23rd Plan of Development and Operations (POD 23) dated Feb. 19 (see NGI, Feb. 21).

Exxon's latest development plan for Point Thomson, which was submitted to the Alaska Department of Natural Resources (DNR) in February, calls for producing 200 MMcf/d by late 2014. In addition, about 10,000 b/d of liquid condensate would be separated from the gas and shipped through new and existing oil pipelines, and the remainder would be pumped back into the reservoir to maintain pressure. The proposal indicates that Exxon already has secured a drilling rig and wants to drill five exploratory wells. The project also would allow for expansion if the state's gas pipeline ultimately is built.

"Appellants agree and commit to undertake the work programs set forth in POD 23 so as to accomplish the POD 23 objectives of fully delineating the Point Thomson Unit and starting up the IPS [initial production system] facility," the proposed settlement reads.

If the companies fail to meet their commitment to the $1.3 billion plan to develop the field, a judge could break up the state's Point Thomson Unit, which could mean the dissolution of the leases.

Alaska state officials refused to comment for a report last week in the Anchorage Daily News, the paper said.

Point Thomson is adjacent to the Arctic National Wildlife Refuge, about 60 miles east of Prudhoe Bay. Estimates say it could hold about 25% of the North Slope's 35 Tcf of natural gas as well as 300 million bbl of oil.

The Point Thomson leaseholders have argued in the past that the Point Thomson leases could not be economically developed, and the state threatened to nullify the leases. An Alaska Superior Court judge at the end of December ruled that the state's Department of Natural Resources (DNR) was in the right when it rejected the 22nd plan of development for Point Thomson (see NGI, Jan. 7). A DNR spokesman told NGI last Thursday that the department couldn't comment on the latest proposal from the leaseholders while it is being considered.

The state's threat of nullifying the leases has proceeded alongside its pressure on the producers to underwrite a massive pipeline to the south. And litigation over the Point Thomson leases has been blamed for driving MidAmerican Energy away from filing a gasline proposal under the Alaska Gasline Inducement Act (see NGI, Dec. 10, 2007).

Previously, the leaseholders had sought a stay that would have allowed them to retain leases while they fought the state's earlier decision to take the leases back after the companies failed for years to develop the North Slope field. Their motion for a stay was denied in the spring (see NGI, May 7, 2007). ExxonMobil had asked the court in December 2006 to overturn the state's decision to revoke the company's leases.

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