Governor Sean Parnell today, (Friday) announced what is likely to be seen as a milestone in the development of North Slope Liquefied Natural Gas, or LNG. He says litigation concerning the development of Point Thomson, on the eastern North Slope has been settled … and three major producers are now aligned with the Alaska Pipeline Project to focus on completion of a gas line from the North Slope to Tidewater and export to Pacific Rim Customers. Department of Natural Resources Commissioner Dan Sullivan, was on hand to explain.
“This agreement does not guarantee a major gas line for Alaska, but it certainly moves us significant step closer. The IPS required by the agreement and the full field development set forth by the agreement all serve as a pre-investment on the ultimate goal of large scale commercialization of gas from the North Slope.”
The announcement follows a meeting of the top CEO’s of ConocoPhillips, BP, Exxon and the governor in January.
Point Thomson litigation goes back to 2005 when then governor Frank Murkowski began the process of taking state leases away from Exxon-Mobil for not taking steps to develop the field.
With the settlement now in place, Governor Parnell says the state can finally begin moving forward. The Governor noted that Point Thompson gas must be combined with Prudhoe Bay gas to maximize the long-term interests of the state.
“If we can get the state off of you know, going six different directions and consolidate into two that can then merge into a gasline, we will have a gasline sooner in Alaska’s interest than if we spend our time trying to spray a shotgun shell as opposed to a more targeted approach … bottom line is this is moving Alaska’s gas interests forward for us as Alaskans and maximizing those interests for years ahead.”
Responding to questions from reporters, Parnell said the settlement is not linked to House Bill 110, the measure currently stalled in the legislature that would give major tax breaks to the industry for increased production.
“HB110 addresses oil taxes. One of my benchmarks that I set forth in my state of the state was that if these benchmarks for progress are met, if these companies resolve Point Thompson, get alignment on a gasline, meet together with agdc and meet those benchmarks in the state of the state for this year, which the next set of benchmarks are due in the fall, as an administration we would be ready to work with legislators on gas taxes next year, in 2013 to move forward on a gasline.”
Commissioner Sullivan explained that the settlement was designed to motivate the corporations involved to move steadily toward production. He says the settlement documents include several safegaurds for the state–primarily that if work does not continue toward producing from Point Thomson, the state gets the leases back without needing further litigation. It lays out timelines and benchmarks companies must meet, such as the development of ‘initial production systems’, or I-P-S — that’s the near-term production that the companies have agreed to — 10,000 barrels a day by 2016.
“If the companies don’t either sanction a major gas sale or commit to one of these then they will have automatic contraction of significant acreage from Point Thompson. If for some reason they don’t follow through on the ips, or do any of the alternatives … even though there’s producing wells on certain leases, we have a provision that says we get it all back — all of it by 2019, including the leases with the producing wells on them.”
Getting the LNG to market is still years away according to Parnell and Sullivan. They estimate that the development of Point Thomson under the new agreement provides potential for significant gas volumes for in-state use by 2019. The long-term plan is to pipe the LNG to a Southcentral port for sale in Asian markets.