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Parnell: Time to settle lease dispute: Point Thomson talks on tap

Posted: Wednesday, February 03, 2010

Gov. Sean Parnell says it is time for the state and Point Thomson field leaseowners to settle a long-standing dispute and litigation over the gas and condensate field on the North Slope.

"We're at a point where we need to resolve this litigation, and I intend to work diligently to see if I can bring this to a conclusion that is in the best interest of Alaska," Parnell said Jan. 22 in a speech at the Meet Alaska conference, sponsored by the Alaska Support Industry Alliance, an oil services contractor trade group.

The state has moved since 2005 to terminate the Point Thomson unit and cancel state oil and gas leases held by BP, Chevron, ConocoPhillips and ExxonMobil in a long-standing dispute over past work obligations. ExxonMobil is the unit's operator.

The companies filed suit to block the unit and lease terminations.

Under an interim agreement, the state has allowed ExxonMobil to move ahead with construction of a $1.3 billion gas cycling and condensate production project at Point Thomson.

The first two production wells are being drilled this winter. However, the legal status of most Point Thomson leases is still clouded by the ongoing lawsuit.

Settlement talks between the state and the companies are under way, but a state Superior Court judge recently invalidated the state's most recent decision rejecting the companies' appeal of the unit termination over procedural flaws.

Judge Sharon Gleason gave both sides 30 days to present arguments on whether the state Department of Natural Resources will conduct a new appeal proceeding or allow Gleason to decide the issue in her court.

Gleason's decision, and now Parnell's statement, is likely to add impetus to the settlement efforts, industry sources in Alaska say.

Rich Kruger, president of ExxonMobil Production Co., said he was pleased to hear Parnell's commitment to seeking settlement.

"We need to resolve this, and right now. Clarifying the legal status of Point Thomson gas is absolutely critical to the upcoming open seasons planned for a natural gas pipeline," Kruger said.

Resolving the dispute will also allow ExxonMobil to proceed with the development of the gas field in an orderly manner, preserving the momentum that has been built with contractors and support companies.

"There is a lot of work being done on this now, and it's important to preserve that," Kruger said.

Point Thomson holds an estimated 8 trillion cubic feet of gas and 200 million barrels of condensate. The project now under way would produce 10,000 barrels a day of liquid condensates by 2013 with produced gas being injected and recycled through the reservoir.

The project is being designed for expansion if reservoir technical issues can be resolved, ExxonMobil has said in past briefings. It can be also used for conventional gas production if a planned $30 billion Alaska gas pipeline is built.

There are uncertainties about the Point Thomson reservoir, mainly on whether gas fluids can "cycle" efficiently from injection wells to producing wells through the reservoir rock in all parts of the reservoir, and also the extent of the reservoir to the north. In past briefings ExxonMobil has said that difficulties in interpretation of seismic data done offshore through water and ice has raised questions about the reservoir extension to the north.

The wells being drilled now will help resolve those questions, and when the project actually gets into production, planned for 2013, reservoir engineers will be able to see how effectively the fluids are moving through the rock.

In his talk to Meet Alaska, Kruger said the first of five planned development wells at Point Thomson has been completed. This was an extended reach well, which started vertically from the surface and was then drilled laterally at an angle to a reservoir target about two miles offshore from the surface location of the rig, which is situated near the shore.

A second well is now under way at the Point Thomson site.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.



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