State approves plan proposing increased Point Thomson oil production

Alaska officials said Friday they ended a dispute with ExxonMobil and accepted the oil giant's plan proposing to expand oil production by 50,000 barrels daily at a field beside the newly opened Arctic National Wildlife Refuge.

The state's Oil and Gas division in August had rejected the expansion plan at the Point Thomson field, calling it "vague" and noncommittal. But ExxonMobil in October provided a response addressing the state's concerns, Gov. Bill Walker's office said in a statement Friday. The plan extends through 2019.

Point Thomson is a complex field containing one-fourth of the gas that would be used for the state's $43 billion project to export liquefied natural gas to Asia.

But, with the Alaska LNG project years from development, if it ever comes, light oil, or condensate, is currently being stripped from the Point Thomson gas. The natural gas is re-injected back underground for future use. The small amount of condensate, less than 10,000 barrels, is shipped to the trans-Alaska oil pipeline.

Walker indicated Friday that China's interest in the gas-export project was important to the state's decision. Chinese entities have signed a nonbinding agreement that Alaska officials hope leads to a large financial and gas-buying commitment with Chinese entities.

As part of the potential Point Thomson expansion, ExxonMobil had also proposed building a 60-mile pipeline to ship gas to Prudhoe Bay, considered a necessary part of the gas project.

Walker's statement said approval of ExxonMobil's plan by the state adds to the Alaska LNG project's momentum.

Alaska Oil and Gas Director Chantal Walsh rejected the expansion plan in August, saying it lacked detail and ExxonMobil was not meeting the terms of a 2012 settlement with the state that led to the field's first oil production. That first phase was a $4 billion effort, with the state picking up about half the tab through tax incentives. The settlement laid out future development paths at the field.

An Oct. 12 letter from Cory Quarles, vice president of ExxonMobil Alaska Production, provided the division with new information and the required amendments, Walsh said in Friday's reply.

Walsh had been concerned by ExxonMobil statements indicating that expansion planning work was conditional, based on future decisions.

Walsh has said a plan of development needs to specify an operator's plans, not work it might consider if certain events happen.

But Quarles indicated in October that engineering and permitting work is underway, a change from the company's initial language, Walsh said in the reply.

Activity associated with the potential expansion includes drilling two production wells, Walsh said. The revised plan also includes preparations required before potential gas shipments can begin, Walsh said.

For decades, the state and ExxonMobil have butted heads over the lack of development at the remote field.

[After decades of failed attempts, oil production begins at Point Thomson]

Across the Canning River to the east lies the potentially oil-rich, 23-million-acre Arctic refuge that has long been off-limits to oil drilling.

That changed this week with Republicans in control of the White House and Congress. On Friday, President Donald Trump signed a tax bill into law with a provision allowing oil development in the refuge's coastal plain, a first.