Two important announcements on March 30, 2012 from the State of Alaska and major North Slope producers have brightened the prospects for natural gas development in northern Alaska and the possibility of an in-state pipeline. First, the State of Alaska announced a settlement of the ongoing lawsuit stemming from the Alaska Department of Natural Resources 2005 default for lack of development of leases in the Point Thompson unit. The settlement brings to an end seven years of litigation over the state’s largest oil and gas field, located approximately 60 miles east of the Prudhoe Bay field.
The settlement essentially provides for development of an initial production system (“IPS”) for Point Thompson by the major North Slope producers, with specific work commitments including construction and installation of a 70k barrel per day common carrier pipeline for liquids (including gas condensate) that will tie into TAPS. The settlement further provides for incentives and benchmarks leading towards full-field development of Point Thompson resources, with the primary goal of incentivizing commercialization of North Slope gas leading to a major gas sale exceeding 500 million cubic feet/day. However, the settlement provides flexibility, and if the producers are unable to sanction a major gas sale by 2016 or 2019, the settlement requires a commitment to otherwise develop Point Thompson resources by either expanding liquid production into TAPS or integrating the Point Thompson and Prudhoe fields with gas made available for in-state use. The settlement includes consequences if the producers abandon the IPS or fail to develop Point Thompson, with lease acreage contracting and returning to the state.
Second, ExxonMobil, ConocoPhillips, and BP jointly announced their collective alignment working with the Alaska Pipeline Project parties, with an aim of commercializing North Slope natural gas within the Alaska Gasline Inducement Act framework, assessing large-scale liquefied natural gas exports from south-central Alaska as an alternative to exports through a previously proposed gas line through Alberta.
More information about the Point Thompson settlement is available from the Department of Natural Resources at http://www.dnr.alaska.gov/commis/priorities/point_thomson.htm, with a link provided to the ExxonMobil, ConocoPhillips, and BP announcement http://www.dnr.alaska.gov/commis/priorities/point_thomson_files/ceo_letter.pdf.