10-4-13

10-4-13

Major Gas Pipeline Player Points To Major Project Progress

Dave Harbour

Yesterday, ExxonMobil's Point Thomson Production Manager told members of the Resource Development Council for Alaska that a large, Alaska LNG export project could be competitive–with qualifications.

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The Thursday breakfast meeting opened to a sold-out audience in the Dena'ina Convention Center in downtown Anchorage. President Phil Cochrane (NGP Photo) opened the meeting, introducing Karen Hagedorn's presentation on both Point Thomson progress and outlook for a major Alaska North Slope (ANS) natural gas export project.

Hagedorn, who began her career at Prudhoe Bay over 20 years ago, first reviewed progress of the Point Thomson project, noting it is ExxonMobil's, "first operating project in Alaska". (To watch a video of Hagedorn's complete presentation, go here.)

The Point Thomson play is primarily a gas field, Hagedorn said, discovered in 1977. It consists of about 150 square miles, both on- and off-shore with all facilities positioned onshore. It is 60 miles east of Prudhoe Bay, adjacent to the Arctic National Wildlife Refuge.

Development of Point Thompson is critical to an ANS gas pipeline because its 8 Tcf of gas is almost a third of the gas available for a large pipeline project.

Hagedorn explained that Point Thomson is being developed in stages. Initial production — by May of 2016 — will transport up to 10 thousand barrels per day of condensate to the Trans Alaska Pipeline System (TAPS), employing one production and two injection wells. The pipeline transporting it to TAPS will be capable if accepting increased production, up to 70 thousand barrels per day.

This past summer, the huge project employed over 600 Alaskans and 65 Alaskan companies. The company is training production operators now.

The impressive Point Thomson numbers are exceeded by the larger Alaska Gas Pipeline/LNG project sometimes known as the Alaska Gasline Inducement Act (AGIA) project, or the Alaska Pipeline Project (APP). The project will cost $45-65 billion, and at a peak, will employ 9-15 thousand with an operational workforce of 1 thousand.

Hagedorn pointed out that the massive ANS gas resources create a "clear objective" to commercialize the gas which, she said, "can be done and can be globally competitive."

We will leave faithful readers to scroll down for more details in the video below, but will underscore a major point in Hagedorn's conclusion.

First, she said, in answer to one audience question about project hurdles that 1) "permitting will be a key element", as will 2) "a predictable, durable and competitive fiscal structure."

Second, in answer to a question dealing with final terminus of the pipeline and siting for an LNG export plant, she said that "over twenty sites have been evaluated and prioritized but it is premature to announce the location of the site at this point."

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Conclusion

On Hagedorn's first point we would observe that our state and federal governments are the major players. Will regulators responsibly but cooperatively attempt to expedite permitting. Or, will government delay a reasonable development and allow environmental activists to unreasonably intervene and delay permitting processes?

Similarly, will the state government move uncharacteristically quickly to develop contractual or constitutional fiscal assurances so vital to such large investments in Alaska? Or will government leaders delay the decision while others demonize and criticize both the project and the investors it depends upon?

Finally, we conclude that the four major players in the AGIA, APP project have likely chosen a terminus. But why should they announce it now? No, they will do well to keep that news to themselves until LNG sales agreements and other commercial arrangements are in place along with the permitting and fiscal assurances any responsible investor would require.

From this report, we believe the principle ANS investors are moving decisively ahead to both build out facilities and prepare for commercializing Alaska's huge natural gas reserves.

Alaska: the ball is in our court! Will we rise to the occasion? Or, will we sink to petty political levels of dispute, yanking gas pipeline defeat from the jaws of victory and prosperity?