ExxonMobil set to begin Point Thomson construction


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ExxonMobil Corp. is set to begin construction this winter on its multi-billion-dollar gas cycling and condensate production project at Point Thomson on Alaska’s North Slope.

That’s if a federal environmental impact statement, or EIS, is finalized by the U.S. Army Corps of Engineers, as is expected, ExxonMobil’s senior project manager Lee Bruce said.

Materials for Point Thomson construction also started arriving at Seward the night of June 12, Bruce said.

The company presented its plans to legislators at a meeting of the Senate Judiciary Committee in Anchorage June 12. The lineup of contractors on the project is like a “who’s who” in the oil support industry, because there’s not a lot of other construction happening on the slope this year.

Assuming the final EIS and record of decision are issued in schedule, ExxonMobil will begin construction of roads and an expansion of a central process facility and well pad now at the site, as well as installation of Vertical Support Members, or VSMs, for a 22-inch liquids pipeline. A 2,500-foot gravel airstrip will also be built this winter, Bruce said.

To do the work, a winter ice road must be built first from the Prudhoe Bay field 60 miles to the west, because there is no year-around road access to Point Thomson, Bruce said.

Point Thomson has about 8 trillion cubic feet of natural gas and about 300 million barrels of hydrocarbon liquids, mostly condensate liquids in the main gas reservoir, but also some conventional crude oil at the bottom of the reservoir and in nearby, separate oil deposits.

The plan for the following winter, the 2014-15 winter construction season, is for the pipeline to be built from Point Thomson to connect with an existing pipeline from the Badami field to Prudhoe Bay, Bruce said. Field pipelines will also be installed in Point Thomson itself, he said.

In the following two years a drill rig will be brought back to the field to drill more gas production wells and gas process and compression facilities will be installed. Production is scheduled to start in April, 2016, Bruce said. “I’ve challenged my team to beat that schedule, but all of this will depend on permits being issued this fall,” Bruce told the legislators.

Key challenges at Point Thomson for ExxonMobil and its partners, which include BP and ConocoPhillips as major leaseholders, are the very high pressure in the main gas reservoir, which is over 10,000 pounds per square inch, and the need to build large and study gas compression facilities to inject produced gas back underground at a higher pressure, Bruce said.

The remote location in the eastern North Slope, with no current transportation access, is another challenge, he said.

The companies have spent more than $1 billion in development of the project so far, “and we have several more billion to go,” Bruce said. The companies have not released the total expected capital costs of the project.

State Sen. Hollis French, D-Anchorage, who chairs the Judiciary Committee, said he was surprised at the magnitude and complexity of the project and that it will produce only 10,000 barrels per day of condensates.

Bruce said the cycling project is intended as the first stage of Point Thomson development.

Depending on how the reservoir performs after the initial project starts up in 2016, the cycling and liquids production could be scaled up or the project converted to conventional gas production to support a major North Slope gas pipeline if one is built, or alternatively the transport of gas to the Prudhoe Bay field provide pressure for more oil production in that large oil field.

The legislative committee was conducting an oversight hearing of litigation settlement between the state and the Point Thomson leaderowners reached earlier this year. A commitment by the companies to proceed with the gas cycling project and Point Thomson development was made as a part of the settlement.

French said the hearing was done as part of the Legislature’s responsibility for oversight of executive branch actions.

“This settlement has multi-billion-dollar implications for the state, and we are reviewing it as part of our due diligence responsibility,” French said in comments before the hearing.

“We want to determine if the settlement is in the state’s best interest. The departments of Natural Resources and Law say it is, but we have the normal citizen’s interest to look at this and kick the tires a bit.”

A former state oil and gas director, Mark Myers, has raised questions about parts of the settlement during a committee hearing in Juneau in late April as the Legislature was concluding a special session on oil and gas taxes.

Among other criticisms, Myers said in April that he felt the agreement left too much control over development of the state leases with the companies, and that it weakens the state’s influence.

The companies were working on the gas cycling project before the settlement, as part of an interim settlement of the legal dispute, but the final agreement requires them to finish the project or lose leases in the Point Thomson field.

The dispute arose in 2006 and 2007 when the state felt the companies were not moving fast enough toward development of Point Thomson.

The state moved to terminate the Point Thomson unit and the leases, which triggered a lawsuit from the companies.

The settlement is also part of a broader agreement between the companies, which also own the majority of leases in the Prudhoe Bay field, to pursue a gas pipeline and liquefied natural gas project built at the southern Alaska port.

Feasibility studies on that project are now underway and a report on progress is due to Gov. Sean Parnell in September.

 

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

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