Sticking at it: ExxonMobil is pressing ahead with work at Point Thomson on Alaska's North Slope
ExxonMobil calls Point Thomson bluff
ExxonMobil is set to push ahead with new infrastructure and development at the long-languishing Point Thomson field on Alaska’s North Slope despite an agreement with the state over whether it still owns the leases on which the field lies.
ExxonMobil says it is poised to launch a new $1.3 billion plan to develop the field, the first exploration since 1982. The company plans to build nearly 50 miles of ice road and an ice air strip and start drilling exploration wells this winter, the first wells to be drilled since 1982. Some contractors have been hired and, ultimately, 200 people will be employed on the work, which will prepare for oil production that is scheduled to start in 2014, the company told Reuters.
However, the state says ExxonMobil and its joint venture partners no longer own the Point Thomson leases. The Alaska Department of Natural Resources formally revoked the leases, some of which date back to the 1960s, for what it claims is non-performance by ExxonMobil and the partners.
The company has obtained a couple of permits from the state for surface work: one for water use and one that allows staging of equipment, fuel and a work camp, Exxon will not be allowed to drill any wells or do any subsurface work on what is now referred to as the "former Point Thomson unit," state officials said.
"They won't be issued any permits that are contingent on having leasehold rights," said Nan Thompson, petroleum manager for the department's Division of Oil and Gas. "So anything they do is at their own risk as to whether they will regain those rights."
ExxonMobil, which has been the operator on behalf of itself and partners BP, Chevron and ConocoPhillips, maintains that it still owns the leases and can still do development work there.
"We have the right to conduct drilling activities under the terms of the leases, which we do not believe have expired," company spokeswoman Margaret Ross said in an email sent earlier this month.
ExxonMobil is already preparing a rig, has ordered materials and has awarded contracts to Alaska companies doing preparatory work "for the multi-well drilling program", Ross said.
The Point Thomson field, on state land just west of the Arctic National Wildlife Refuge, holds an estimated 8 trillion to 9 trillion cubic feet of natural gas and hundreds of millions of barrels of liquids, according to the Alaska Department of Natural Resources.
While commercialisation of the natural gas must wait until there is a pipeline to ship the product from the North Slope, the state has long maintained that ExxonMobil and its partners are obligated by to produce Point Thomson's liquids or relinquish the leases.
A study commissioned earlier this year by the Division of Oil and Gas estimated that Point Thomson holds 580 million to 950 million barrels of oil and 490 million to 600 million barrels of natural gas liquids.
The state's efforts to revoke Point Thomson leases started in 2005 when the Division of Oil and Gas rejected ExxonMobil's 22nd consecutive plan of development for the field. In that plan, ExxonMobil and its partners declared that development would have to wait for a natural gas pipeline, a project estimated at the time to cost over $20 billion.
The state subsequently rejected ExxonMobil's 23rd plan of development for Point Thomson, which calls for production of at least 10,000 barrels of liquids per day by 2014.
ExxonMobil and its partners have challenged the state's actions.
The dispute over Point Thomson leases is now pending in Alaska Superior Court. State officials have predicted the issue will be resolved in the courts in about two years and that there will be ready buyers once the leases are put back up for auction.