Exxon agrees to Point Thomson development plan

Posted: Thursday, November 15, 2001

ANCHORAGE (AP) -- Exxon Mobil Corp. and the state have agreed to a plan to develop a large Point Thomson field on the North Slope.

Point Thomson holds an estimated 8 trillion cubic feet of natural gas and 200 million barrels of natural gas liquids, the second largest gas field on the Slope after Prudhoe Bay.

Despite these huge reserves, the project has been hobbled by large development costs, lack of a pipeline to transport the gas and the complex problem of producing gas from the high-pressure reservoir.

Now, Exxon and its main partners, BP and Chevron, have agreed to a timetable to drill eight exploration and development wells by 2008. The agreement with the state does not guarantee production from the field. But if the companies fail to drill the wells, they would forfeit thousands of acres and pay a penalty of up to $27.5 million.

The development agreement targets the natural gas that would become a liquid when it's produced -- estimated at 200 million barrels. This liquid gas could flow down the trans-Alaska oil pipeline to tankers in Valdez.

Point Thomson was discovered in 1977. The agreement is the 18th plan Exxon has submitted to the state since then, said Carol Lee, a land manager with the state Oil and Gas Division.

Point Thomson presented Exxon with a series of challenges, said Lee and Ken Boyd, an oil development consultant who lives in Eagle River.

The natural gas is under high pressure which requires complex, costly equipment to handle the gas as it comes out of the ground, Lee.

Another problem is that Point Thomson sits more than 30 miles east of the oil pipeline at Prudhoe Bay. The distance saddles the project with further costs to get gas liquids to the pipeline.

In addition to liquid natural gas, Point Thomson has 8 trillion cubic feet of gas. Now that a natural gas pipeline to move the North Slope's large undeveloped gas reserves to market appears possible, Boyd speculated that Exxon may feel more comfortable there will be a market for Point Thomson's gas.

Boyd also said that when BP opened the nearby Badami field in 1998, the North Slope's pipeline network was extended more than halfway to Point Thomson, helping to cut costs at the new field.

''I think its going to happen. Exxon has put some real dates on the table. If they don't do it, they lose some real valuable property,'' Boyd said.

Point Thomson development may spur development of other North Slope reserves, Boyd said. BP's Sourdough discovery lies nearby. Also, Point Thomson lies next to the coastal plain of the Arctic National Wildlife Refuge.

Exxon owns 36.55 percent of the field, BP owns 41.74 percent and Chevron owns 19.22 percent, according to the state. Lee said the companies are negotiating and may change field ownership shares.

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