State expands Point Thomson leases

The state Division of Oil and Gas has approved an expansion of the Point Thomson oil and gas lease unit on the North Slope. The expansion is part of an agreement for the petroleum companies owning the leases to do more exploration and possibly proceed with development of a major gas and gas condensate field.

Point Thomson is about 60 miles east of Prudhoe Bay. In 1977 Exxon discovered the gas field, which is now estimated to contain more than 8 trillion cubic feet of natural gas and 200 million barrels of liquid condensates.

ExxonMobil Production Co.’s other major partners are BP Exploration (Alaska) Inc. and Chevron USA Inc. A unit is a group of oil and gas leases that overlie a common petroleum reservoir or prospect. Companies form units to pool their ownership interests and make exploration and development more efficient.

Several leases near the unit were due to expire, and the expansion of the unit to include these leases will extend the leases. In approving the extension, the state secured the commitment from the companies to do more drilling.

If the companies fail to live up to the commitment, the leases expire and the state takes the acreage back, according to the agreement. The state also increased the royalty in some of the more valuable leases from 16.66 percent of production to 20 percent.

Exxon has drilled 14 exploration wells in the area, but lack of a pipeline to move gas off the North Slope stymied development. The reservoir is also under very high pressure, which makes the drilling of production wells and development of surface infrastructure complex and costly.

Under the agreement with the state, the companies agreed to drill another exploration well in 2004, begin development drilling by 2006 and complete seven development wells by 2008, according to Mark Meyers, director of the Division of Oil and Gas.

A pipeline would be built to connect Point Thomson with the existing Badami field and pipeline 20 miles west.

11/25/2001 - 8:00pm