A big Arctic Alaska gas field with a troubled history may finally be ready to expand

The ExxonMobil facility at Point Thomson in northern Alaska. (Business Wire)
The ExxonMobil facility at Point Thomson in northern Alaska. (Business Wire)

Alaska officials have approved a plan to vastly expand a North Slope oil field that, up to now, has performed below expectations.

The Alaska Division of Oil and Gas last week approved ExxonMobil’s plan to expand the Point Thomson unit over the coming years with new wells, and a new pipeline to carry dry natural gas to Prudhoe Bay and a goal of increasing liquids production by a factor of at least five.

The expansion will help bring the state closer to its goal of selling the vast quantities of now-stranded North Slope natural gas to international markets, Alaska Gov. Bill Walker said in a statement. The Walker administration is pushing for a new 800-mile pipeline that would allow liquefied natural gas to be shipped from ports in southern Alaska to Asian markets.

In November, the project received substantial backing Chinese state-run companies.

“Our approval of the Point Thomson to Prudhoe Bay pipeline plan adds to the momentum of the Alaska LNG Project and demonstrates the commitment of the Point Thomson working interest owners to move gas from Point Thomson into Alaska Gasline Development Corp.’s 800-mile pipeline,” Walker said in his statement. “The expansion project also helps build a stronger Alaska, because it will increase oil production out of Point Thomson by 50,000 barrels per day.”

Point Thomson lies on the eastern edge of state territory on the North Slope, near the western border of the Arctic National Wildlife Refuge. More of a natural gas field than an oil field, it has a troubled history.

Leases in the field date back to the 1970s, but production did not start until last year. Development was prompted by a protracted legal battle between the state, which had threatened to revoke the leases, and the unit’s owner companies, led by operator ExxonMobil. Under a 2012 settlement, the companies agreed to develop Point Thomson and produce 10,000 barrels a day of liquids — mostly in the form of natural gas condensates — by the winter of 2015-16. Production started in April of 2016, but it has generally fallen short of the 10,000-barrel-per-day target, according to state officials.

ExxonMobil and its Point Thomson partners have argued that complications in the reservoir, which has extremely high pressure, had made production difficult. Major partners with ExxonMobil are BP Exploration (Alaska) Inc. and ConocoPhillips, operators of the Prudhoe Bay and Kuparuk fields, the two largest in Alaska.

The state in August rejected an earlier version of ExxonMobil’s expansion plan. State officials criticized that plan as too vague, with expansion work conditioned on yet-to-be-secured funding from partner companies.

The follow-up plan had enough detail and work commitments to justify approval, state officials said.

Point Thomson, with an estimated 8 trillion cubic feet of natural gas, is important to state plans for a major natural gas pipeline. Gas shipped out of Point Thomson, as the expansion plan envisions, could be used in the short term to boost oil production at Prudhoe Bay and related fields. There, natural gas is injected back into reservoirs to build pressure and make recovery of oil easier. In the longer term, state officials hope, Point Thomson natural gas would be available for export to markets outside of Alaska.

The newly approved expansion plan could result in a boost of Point Thomson natural gas production from the current rate of no more than 200 million cubic feet a day to 920 million cubic feet a day, according to state documents.