Soon after Alaska became a state, nearly 50 years ago, Exxon Mobil began buying leases at Pt. Thomson on the eastern side of the North Slope. Now, after a seven year legal battle with the state, they are starting to develop the area.
Exxon Mobil started leasing state land at Pt. Thomson in 1965. By the late 70s, they knew the area had significant amounts of oil and gas, but they never produced any of it because it didn’t make sense economically. The reservoir is more challenging to tap because it’s under such high pressure.
The companies went back and forth with the state for decades coming to different agreements over when the area would be developed. Finally, in 2005, the state had had enough. They started legal proceedings to take the leases away and seven years later, “the settlement with Exxon and others was announced last spring,” said Joe Balash, the acting commissioner of Alaska’s Department of Natural Resources.
In the March 2012 agreement, Exxon committed to developing Pt. Thompson. “And there were a few skeptics who thought we somehow got snookered and that nothing was ever going to happen,” Balash continued. “Well, the progress that’s been made in the past 15 months is something that we’re quite proud of here at DNR.”
The progress includes a massive gravel pad built on top of the spongy tundra, right next to the coast of the Arctic Ocean. The two small wells that were drilled in 2010 are now dwarfed by expanses of buildings for living and working and giant fuel tanks to run the operation. A new road runs inland for six miles to the airstrip. They built it further from the coast so they wouldn’t have as many problems with fog.
Christina Nordstrom, Exxon’s technical manager for the project, said since the summer of 2012, Exxon has employed 1,200 people to build the new infrastructure.
“Our camp went fully operational kind of early August time frame. They started serving meals, moved people in. There’s a gym, which you really need if you go there because the food is good.”
The 500 workers who will live at the camp this winter will start installing the 22-mile long pipeline that will carry a hydrocarbon fluid called “condensate” to the Badami oil field. Condensate isn’t oil. It’s used for making things like jet fuel and plastics. From Badami, the fluid will go to the Trans-Alaska Pipeline.
According to the settlement with the state, Exxon has to start producing something by the winter’s end of 2016, or they will lose rights to drill on some of the land.
Nordstrom said initial production will be 10,000 barrels of condensate per day. “But this pipeline is sized to take up to 70,000 barrels per day, so has been pre-designed for possible expansion.”
The production wells will be on a western pad about five miles from the main camp. The company is required to drill there as part of the settlement. They’ll use directional drilling to access most of the resource, which is actually offshore.
At the main camp, a plant will separate the liquid condensate from the natural gas that makes up the vast majority of the reservoir. “The gas itself will come out of the separator,” explained Nordstrom. Then “it goes through a compression system that will inject it back into two wells, back into the reservoir to be preserved for future development.”
That “future development” will have to wait until a natural gas pipeline is built. At this point, there’s no way to transport the gas off the North Slope.
In order to justify the proposed $40 – $60 billion pipeline, Federal gas pipeline coordinator Larry Persily said they need the 8 trillion cubic feet of gas from Point Thomson.
“It’s encouraging to see they are going ahead spending billions on Point Thomson because to me that’s an indication that they see a gasline in the future,” he said.
Exxon and its partners have until 2019 to come up with a plan for the gas. If it’s not sent down a pipeline, it could be used to increase reservoir pressure in Prudhoe Bay and help producers pump more oil.
Exxon declined to comment on any future plans for major gas sales.
So despite the promises, DNR’s Balash said he still has some reservations. “So far, they’re making progress, but until they actually start moving some hydrocarbons from Pt. Thomson over to TAPS, we’re going to withhold some judgment.”
ExxonMobil is running operations at Point Thomson, but they only own 62 percent of the oil and gas. BP owns 32 percent and ConocoPhillips has 5.