Saturday, September 29, 2012

Point Thomson advances; Alaska proposes granting pipeline right of way; wait for federal permit continues

Wesley Loy
For Petroleum News

ExxonMobil is close to securing a state right of way for a pipeline to support its planned Point Thomson development on Alaska’s North Slope.

But prospects for another key authorization remained unclear as the U.S. Army Corps of Engineers missed its target date for deciding on a wetlands permit for the project.

ExxonMobil is planning to produce petroleum liquids from the remote Point Thomson field, located on state land about 60 miles east of Prudhoe Bay. State officials have long pushed for production at Point Thomson, and in March signed a legal settlement with ExxonMobil and its partners laying out a development schedule.

Ultimately, the leaseholders could spend billions of dollars to fully develop the field, which holds an estimated 8 trillion cubic feet of natural gas and hundreds of millions of barrels of crude oil and other petroleum liquids.

On Sept. 19, state Natural Resources Commissioner Dan Sullivan signed a proposed lease decision for the Point Thomson Export Pipeline.

The pipeline will carry Point Thomson liquids 22 miles west across state land, feeding it into the existing North Slope pipeline network at the Badami field.

Sullivan’s preliminary conclusion is ExxonMobil is “fit, willing and able to construct and operate a pipeline in a manner required by present and future public interest,” a state public notice said.

Public comment invited

The State Pipeline Coordinator’s Office, part of DNR, is taking written public comment on the proposed lease through Oct. 30.  DNR is holding public hearings in three North Slope villages: Barrow, Oct. 23; Kaktovik, Oct. 24; and Nuiqsut, Oct. 25. A hearing also is planned in Fairbanks on Oct. 29.

The commissioner intends to issue the right-of-way lease provided no major issues arise from the public comment period.

The commissioner’s analysis and proposed decision is available at

In leasing land for pipeline rights of way, state law requires the DNR commissioner to make a written finding that the applicant is “fit, willing and able.” The commissioner also must prepare an analysis of the application.

In this case, the applicant is PTE Pipeline LLC, a newly formed company created specifically to build and operate the Point Thomson Export Pipeline. PTE is a subsidiary of ExxonMobil Pipeline Co., which operates an extensive network of pipelines around the United States.

Another state agency also is considering the proposed pipeline.

PTE has applied to the Regulatory Commission of Alaska for a “certificate of public convenience and necessity.”

The commission has scheduled a public hearing for 1:30 p.m. Oct. 23 in Anchorage.

PTE has asked the commission to make a decision on its application by Nov. 30, so that construction can begin this winter.

$204 million project

Total cost to build the Point Thomson pipeline is estimated at $204 million, the commissioner’s analysis says. The annual operating cost is estimated at $26 million.
The design life of the pipeline is 30 years, which matches the length of the proposed right-of-way lease.

“A 30-year design life does not indicate that the pipeline and associated structures will be used up, failure-prone, or requiring replacement at the end of the lease,” the analysis says.

The state has high hopes that the pipeline and the development of the Point Thomson field will lead to an expansion of oil and gas activity across the remote eastern North Slope.

ExxonMobil initially plans to produce a modest 10,000 barrels a day of petroleum liquids from the Point Thomson field. But the common carrier pipeline will have the capacity to handle a much larger throughput — up to 70,000 barrels per day, which is “commensurate with full field development” at Point Thomson, the commissioner’s analysis says.

In building the pipeline, the state is “encouraging the applicant to fill jobs with residents, to the extent practical and possible.”

The pipeline construction workforce is expected to peak at 210 people, the analysis says.

PTE will lay the pipeline from ice roads over two upcoming winter construction seasons.

The pipeline will run roughly parallel to, and just inland from, the Beaufort Sea coast. It will traverse lonely state land, with no communities along the route. The local government, the North Slope Borough, supports the project.

The pipeline, 12 inches in diameter, will connect the main, or central, well pad at Point Thomson to the 12-inch, BP-owned Badami pipeline.

The Point Thomson line will be elevated 7 feet off the ground, mounted on 2,200 vertical support members along its 22-mile length. Elevating the line will allow caribou as well as snowmachines to pass underneath.

The pipeline will feature a “non-shiny exterior metal insulation wrap to minimize visual impacts,” the commissioner’s analysis says.

Part of the line also will feature a thicker steel wall to resist possible stray bullets from subsistence caribou hunters along the coast.

The proposed lease stipulates that pipeline employees and contractors will not be allowed to hunt, fish or trap within the right of way. However, PTE must give the general public access.

Awaiting federal permit

Before construction can begin on the Point Thomson development, ExxonMobil still needs a U.S. Army Corps of Engineers permit to fill wetlands.
The Corps has been considering the company’s application for the permit since late 2009, and had not yet made a decision as Petroleum News went to press.

ExxonMobil has promised the state it will begin production from Point Thomson by the winter of 2015-16. But to achieve that goal, the company says it needs the permit in time for construction to start this winter.

This initial Point Thomson development is a gas cycling project. Natural gas from wells will go to a central processing plant, which will separate out liquid hydrocarbons known as condensate. Dry gas will be injected back into the reservoir, with the condensate going into the Badami-bound pipeline. From there, the Point Thomson production will flow into the trans-Alaska oil pipeline.

In August, the Army Corps said it was aiming to render a “record of decision” by Sept. 21 on the wetlands permit. But the Corps cautioned that date wasn’t firm, saying the record of decision and permit “may not be complete until as late as Nov. 21.”