State denies permit for Point Thomson ice road

AP Photo/Ron Edmonds

The state of Alaska on Nov. 14 denied a key permit to ExxonMobil for an ice road needed for drilling it plans in the disputed Point Thomson gas and condensate field on the North Slope, upping the ante in a contentious dispute between leaseholders at Point Thomson and the state Department of Natural Resources.

A statement on the agency’s decision was posted on DNR’s Web site. ExxonMobil said Nov. 17 that it has yet to receive a letter from DNR giving formal notification of the decision. Other state and federal agencies have given their approvals for the ice road, the company said.

The company says it will keep working on the project in hopes of resolving a dispute with the state. The dispute with the state involves past work obligations at Point Thomson. The state alleges ExxonMobil reneged on commitments and has moved to cancel leases. The issue is now in the Alaska courts, and settlement talks are underway between the companies and the state.

“We have the right to conduct drilling activities under terms of the leases. The Point Thomson working interest owners are proceeding with the project and the drilling plan while we attempt to resolve the dispute with the state,” company spokeswoman Margaret Ross said.

ExxonMobil, the operator at Point Thomson, needs a state permit to build a 50-mile ice road east from Prudhoe Bay to move a drill rig to the field. Work on the ice road needs to begin in begin in November to allow the rig to be moved in time for drilling to start in late January or early February.

If the rig move cannot be done on schedule, it may delay the project because of seasonal constraints in moving equipment on the North Slope. Heavy equipment can only be moved by land during the winter on the Slope.

The Point Thomson leaseowners, which include BP, Chevron and ConocoPhillips as well as ExxonMobil and a number of minority owners, are planning a $1.3 billion gas cycling condensate production project in the field, which is undeveloped. The well planned in January is the first of five production wells needed for the project, which is to produce 10,000 barrels per day of liquid condensates beginning in 2014.

In a press release issued Nov. 17 the state called the company’s effort to get the permit “an effort to force a solution” in the current negotiations over the dispute.

“ExxonMobil has been aware for many months that the state did not approve its drilling plan. Although ExxonMobil has challenged the state’s decisions in court, it is not in the state’s best interests to allow them to proceed until a court determines whether or not the state’s actions were proper,” the press release said.

Ross said ExxonMobil believes the leases are still valid.

An estimated 9 trillion cubic feet of natural gas and 200 million barrels of condensates have been discovered at Point Thomson in exploration drilling during the 1970s and 1980s.

The field has not been developed to date because of lack of a gas pipeline and technical questions over whether liquid condensates can be produced in a gas cycling project. The current project planned by the companies is intended to resolve the technical questions, ExxonMobil has said in previous briefings.

Point Thomson reservoir pressures are high, at 10,200 pounds per square inch, which complicates any development, the company has said.

Updated: 
11/09/2016 - 1:46pm