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ExxonMobil: Point Thomson Termination Threatens Alaska Gasline

ExxonMobil Corp. has asked Alaska's Department of Natural Resources (DNR) to reconsider its termination of the North Slope Point Thomson Unit (PTU) leases held by it and BP Exploration (Alaska), Chevron U.S.A. Inc. and ConocoPhillips Alaska. The company also filed a claim with DNR for $800 million in damages as a "precautionary matter" and warned that the PTU termination threatens the state's gasline plans.

Last month DNR Commissioner Tom Irwin rejected the 23rd Plan of Development and Operations (POD 23) for the oil and gas field and terminated the Point Thomson Unit (see NGI, April 28). This followed the March announcement by ExxonMobil, the operator of PTU, of a proposal that committed the PTU producers to developing the field, which was discovered 30 years ago (see NGI, March 31). If accepted, the producers' proposal would have resolved the litigation over Point Thomson and held the companies to the unit's POD 23 dated Feb. 19 (see NGI, Feb. 25).

"As the Point Thomson Unit interest owners have consistently stated, our preference is to settle this issue outside of the courts through implementation of the Plan of Development submitted to the DNR on Feb. 19, 2008," ExxonMobil spokeswoman Margaret Ross told NGI. "We remain open to working with the DNR to address the commissioner's concerns."

Should ExxonMobil and its fellow producers not come to terms with the DNR, the company will seek damages. Its filing for $800 million is intended to preserve its rights to pursue them. "The DNR has previously said that a claim must be brought in an administrative proceeding, such as this filing, to protect the claim from waiver," Ross said. "We are not seeking to collect any damages at this time."

"It's a bit unusual to see this as part of administrative proceedings," DNR's Kevin Banks, director of the oil and gas division, said of the company's claim for damages. "From my perspective as the director of the division it's an interesting maneuver."

Likely of more immediate concern to the state of Alaska and the administration of Gov. Sarah Palin is the outlook for a gasline to tap the North Slope reserves. Pipeliner TransCanada has a proposal for such a line pending with the state, as does a partnership of BP and ConocoPhillips. A decision on whether to present the TransCanada proposal to state lawmakers for their approval is expected this week. ExxonMobil so far has not committed to join a pipeline project (see NGI, May 5). Its filing last week with the DNR suggests that it's more intent on nailing down the PTU issue.

"...[T]ermination of the Unit will produce years of delay, and will virtually ensure that no one will be in a position to rely on Point Thomson gas in making shipping commitments in any open season on any schedule now proposed," the company said in its filing. "The decision could thus delay for years any gas pipeline from the North Slope, as well as postponing production of liquids at Point Thomson itself."

Banks said Point Thomson and efforts to develop a gasline from the North Slope are on and will stay on separate but parallel tracks.

"This [DNR decision] to me represents some sort of progress for Point Thomson...We have to do what we have to do at Point Thomson and work the pipeline on its own and separate track and make progress in both directions," he told NGI. "I don't see that the state needs to somehow capitulate in our present course on Point Thomson as a solution to the gasline."

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