|Proposed route for the Alaska Pipeline project. Click to enlarge.|
Alaska Governor Sean Parnell announced that two major milestones have been met in the state’s effort to bring Alaska’s North Slope natural gas to Alaskans and markets beyond. The North Slope holds more than 35 trillion cubic feet of discovered natural gas.
First, the State of Alaska resolved its long-running litigation with ExxonMobil and other leaseholders regarding the Point Thomson field, which holds almost a quarter of the North Slope’s known natural gas. Second, the three major producers—ExxonMobil, ConocoPhillips and BP—delivered a letter to the governor announcing that they are now aligned with the Alaska Pipeline Project (APP) parties, and working on a gasline project focusing on bringing North Slope gas to tidewater in Alaska.
Point Thomson. Point Thomson, located 60 miles east of Prudhoe Bay, is Alaska’s largest undeveloped oil and gas field, holding an estimated 8 trillion cubic feet of natural gas and hundreds of millions of barrels of oil and gas liquids. ExxonMobil is the unit operator at Point Thomson, with BP, ConocoPhillips and Chevron holding the majority of the leases. The state’s legal dispute with the companies resulted from the lack of development at Point Thomson for the past 30 years.
Today’s settlement lays out strong near-term production commitments and a clear path for full development of Point Thomson’s significant oil and gas resources, and it establishes clear consequences if the companies do not follow through. The companies have agreed to firm timetables for production at Point Thomson. This will result in significant new investment, increased work for Alaskans and increased revenue for state and local government.
The animating principle of this settlement is that the companies must earn their acreage. The more work, more commitment, more investment and more production that occur, the more acreage the companies will retain.—Alaska Natural Resources Commissioner Dan Sullivan
Major components of the settlement include:
Increasing liquids production into the Trans Alaska Pipeline System (TAPS).
Opening the Eastern North Slope to new development opportunities by adding infrastructure and a 70,000 barrels per day common carrier pipeline connecting to TAPS.
Incentivizing and laying out a clear path and alternatives for full-field development, each of which will require billions of dollars in investment if pursued.
Positioning North Slope gas for a large-scale gas pipeline project.
Providing potential for significant gas volumes for in-state use no later than 2019.
Requiring a commitment to develop a separate oil reservoir within Point Thomson.
Alaska Pipeline Project. The Alaska Pipeline Project proposes to design, permit and construct a new natural gas pipeline system beginning near Alaska’s Prudhoe Bay field and extending over one of two alternative routes.
The Alberta option would extend from Prudhoe Bay to points near Fairbanks, and Delta Junction, and then to the Alaska-Canada border, where the pipeline would connect with a new pipeline in Canada. The pipeline in Canada would extend from the Alaska-Canada border to link up with pipeline systems near Boundary Lake, Alberta, Canada, providing the capability of transporting natural gas into the United States.
The Valdez LNG option would extend from Prudhoe Bay through points near Fairbanks and Delta Junction, and then to LNG facilities (to be built by third parties) near Valdez, Alaska.
In both options, a minimum of five in-state connections to the main pipeline in Alaska (off-takes) would provide local natural gas suppliers the opportunity to obtain natural gas to meet community needs. For the Alberta option, local off-takes will also be available along the pipeline route in Canada.
The Alaska Pipeline Project proposes to design, permit and construct a new gas treatment plant (GTP) as an integral component of the project’s facilities. It would be located near existing Prudhoe Bay facilities and operate in conjunction with either the Alberta or the Valdez options.
A natural gas transmission pipeline connecting the Point Thomson field to the GTP is also a proposed component of both options.
ExxonMobil, ConocoPhillips, BP and TransCanada, through its participation in the Alaska Pipeline Project, announced in a joint letter to Governor Parnell that they have agreed on a work plan aimed at commercializing North Slope natural gas resources within an Alaska Gasline Inducement Act (AGIA) framework. Because of a rapidly evolving global market, large-scale liquefied natural gas (LNG) exports from south-central Alaska will be assessed as an alternative to a natural gas pipeline through Alberta.
In addition to broadening market access, a south-central Alaska LNG approach could more closely align with in-state energy demand and needs. We are now working together on the gas commercialization project concept selection, which would include an associated timeline and an assessment of major project components including in-state pipeline routes and capacities, global LNG trends, and LNG tidewater site locations, among others.—Producers letter to Gov. Parnell
In their joint letter, the CEOs of ExxonMobil, ConocoPhillips and BP also said that the “unprecedented commitments of capital for gas development will require competitive and stable fiscal terms with the State of Alaska first be established”.
With Point Thomson legal issues now settled, the producers are moving forward with the initial development phase of the Point Thomson project.