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Army Corps issues long-awaited permit for Point Thomson

Wesley LoyPetroleum News

Development of a major new oil field in Alaska now appears imminent, as Exxon Mobil has obtained the key permit to begin construction.

The U.S. Army Corps of Engineers issued the permit on Oct. 26, capping an arduous review process spanning more than three years.

Construction could begin this winter at Point Thomson, a rich oil and gas field on the eastern North Slope, next to the Arctic National Wildlife Refuge. Exxon Mobil still needs some important state and local permits but no delay is expected on those.

The Army Corps approved Exxon Mobil's design for the seaside project, with a few modifications.

"We worked closely with the U.S. Army Corps of Engineers to provide requested information," said Kim Jordan, an Exxon Mobil spokeswoman in Houston. She said she couldn't comment on timing for the start of construction.

DECISION HAILED

Development of Point Thomson, on state acreage along the Beaufort Sea coast, is a long-standing development goal for Alaska officials and they pushed hard for the permit.

"Great news! Army Corps issued permit to Exxon today to develop Pt. Thomson on the North Slope," U.S. Sen. Mark Begich, D-Alaska, tweeted Oct. 26.

The field is believed to hold hundreds of millions of barrels of crude oil and other petroleum liquids, plus an estimated 8 trillion cubic feet of natural gas. That's about a quarter of the known North Slope gas reserves, which are stranded for lack of a gas pipeline.

Exxon Mobil plans to produce condensate, a light, liquid hydrocarbon associated with natural gas.

Corps delays in issuing the permit, and an underlying "record of decision," were frustrating for the state, Alaska Natural Resources Commissioner Dan Sullivan said.

"But we are encouraged by the issuance of this permit, which is critical to finalizing so many other state and North Slope Borough permits for this multibillion-dollar project," Sullivan said. He complimented Army Corps Col. Christopher Lestochi, Alaska District commander, for his leadership in wrapping up the permitting process.

The state and borough are moving forward with more than 100 permits and authorizations for the project.

Out of patience with the lack of development, state officials in 2005 began steps to break up the Point Thomson unit and take away leases from Exxon Mobil and its partners. The dispute ended in March with a legal agreement for phased development of the field.

Sullivan called the Point Thomson project "a strategic investment for the state" because it will increase throughput in the trans-Alaska oil pipeline and will open the eastern North Slope to additional exploration and development with a new pipeline into the remote area.

"This project should also serve as a pre-investment for large-scale North Slope gas commercialization and, critically, is expected to create hundreds of jobs throughout the state and more than 1,000 jobs at peak employment," Sullivan said.

State legislators likewise were pleased with the Corps permit.

"Alaskans have waited over 30 years for development of these resources and now work should begin this winter," said Rep. Les Gara, D-Anchorage.

PERMIT TERMS

The Corps' permit authorizes Exxon Mobil and its subsidiary, PTE Pipeline LLC, to place fill material and structures in wetlands and navigable waters.

The project has two major elements. The first is the oil field itself, featuring three gravel drill pads, with the middle pad to host production facilities. The field also includes about 10 miles of roads, in-field gathering pipelines, a gravel mine, airstrip, barge dock and emergency boat ramp.

The second element is a 22-mile "export pipeline" to carry Point Thomson production west, linking with BP's Badami pipeline. From there, the production will make its way into the trans-Alaska pipeline.

PTE Pipeline is seeking a state right of way for the above-ground common carrier pipeline. The 12-inch line will have a design capacity of 70,000 barrels a day, although the initial Point Thomson development is for production of only 10,000 barrels of condensate a day.

In its effort to find the "least environmentally damaging practicable alternative," as required by law, the Army Corps considered various project designs.

Exxon Mobil wanted to locate the three drill pads very close to the seashore, to better tap the largely offshore Thomson Sand reservoir with long-reach directional drilling. The Corps requires a slight relocation of the east and west drill pads to increase the coastal setback, concluding reservoir access will remain sufficient.

The Corps also is requiring a reduction in the size of the gravel mine.

The agency rejected the idea of pushing the export pipeline route three to four miles farther inland to minimize impacts on wetlands and coastal subsistence hunting. The Corps concluded an inland pipeline would be harder to access for spill response.

The permit sets a deadline of Oct. 31, 2017, to complete the authorized work.

DOZENS OF CONTRACTORS

The permit contains 37 special conditions to minimize adverse impacts to the environment.

How the design changes will affect Exxon Mobil's project construction timetable remains unclear. The company has told regulators it needs to start construction this winter to keep its pledge of first production from Point Thomson by the winter of 2015-16.

Aside from Exxon Mobil, the field operator, major stakeholders in Point Thomson include BP and Conoco Phillips.

Exxon Mobil already has drilled two production wells at Point Thomson and has worked to line up contractors and, presumably, major production components. The project involves bringing gas from the highly pressurized reservoir to the surface, collecting the condensate, then shooting the dry gas back underground.

Australian firm WorleyParsons in January announced that it had won a contract for engineering, procurement and construction (EPC) services for the Point Thomson project. WorleyParsons estimated its "portion of reimbursable project services" at about $115 million over five years.

"WorleyParsons, working with Fluor, will provide overall project management and EPC services," WorleyParsons said. "PND Engineers, based in Anchorage, will provide infrastructure and civil design. Michael Baker Jr. will develop the pipeline design from their Anchorage office. Additional subcontracts will be awarded to multiple third parties, with a special emphasis on companies based in Alaska."

In a July presentation to state legislators, Exxon Mobil indicated about 60 contractors were involved with the project.


By WESLEY LOY
Petroleum News