Exxon Mobil, BP May Lose Leases to Alaska Oil Field
Exxon Mobil, BP May Lose Leases to Alaska Oil Field (Update2)
(Bloomberg) — Exxon Mobil Corp., BP Plc and other oil companies may have their leases for an Alaska oil and gas field revoked by the state because they took too long to develop it, a judge said.
Alaska Superior Court Judge Sharon Gleason ruled yesterday that the state was allowed in 2006 to revoke its agreement with the companies, which have held the leases for Point Thomson since the 1970s, because they failed to bring the field into production.
“This ruling represents another significant step forward in the state’s efforts to develop the valuable oil and gas resources in the Point Thomson reservoir and to hold the lessees to the commitments they made in the unit agreement,'’ Alaska Governor Sarah Palin said today in a statement.
Gleason ordered the Alaska Department of Natural Resources to hold a hearing on the lease terminations. She said the agency didn’t give the companies enough notice to respond when it decided to revoke the agreement.
The companies “have the legal right to have another opportunity but we don’t have to give it to them,'’ Nan Thompson, a petroleum unit manager at the Alaska Department of Natural Resources, said in a phone interview today. “We just have to hear them out.'’
Exxon Mobil spokeswoman Kimberly Johnson Brasington said in an e-mailed statement the company is pleased that the Superior Court “reversed the DNR’s decision terminating the PTU.'’
“The Superior Court decision confirms that the DNR action terminating the PTU was wrong,'’ she said. ExxonMobil and the other Point Thompson interest owners will continue to work with Alaska’s Department of Natural Resources to resolve this issue, she added.
A BP representative couldn’t be reached for comment immediately.
Reserves, Leases
The undeveloped Point Thomson field, located 50 miles east of Prudhoe Bay on Alaska’s North Slope, is estimated to hold 300 million barrels of oil and 8 trillion cubic feet of natural gas.
In November 2006, the Alaska Department of Natural Resources ended the companies’ leases after deciding they had taken too long to develop the field. Exxon Mobil and the other companies sued to regain the leases, alleging the state was trying to force them to put the field into production before it was economically viable.
The companies said in court filings that they spent more than $800 million since the 1970s to develop Point Thomson.
New Developments
Gleason’s ruling comes as Alaska’s oil production is declining and state leaders are trying to encourage new developments. Point Thomson has also been considered a linchpin in tapping Alaska’s North Slope natural gas reserves, estimated to be North America’s largest. The state has said the field’s gas is needed for a natural gas pipeline that would cost an estimated $30 billion.
Exxon Mobil has been the field’s unit operator, holding 52 percent of the leases. Other leaseholders include BP with a 29 percent stake, Chevron Corp. with 14 percent, and ConocoPhillips with less than 3 percent.
Development proposals have centered on a project to produce light oil from gas condensates or pumping natural gas into a large pipeline to the Midwest. Such proposals have been obstructed by technological hurdles, the field’s geology and its remote location, Exxon Mobil said in its filing.
Alaska lawmakers passed a bill in May designed to generate competitive bids to build a gas pipeline. On Nov. 30, Palin’s office selected proposals by five companies, including TransCanada Corp. and China Petrochemical Corp., to build a natural gas pipeline linking Alaska’s gas fields to markets.
Restrictive Terms
Exxon Mobil and BP didn’t submit gas line applications. Company officials said the application terms set by Palin and the Alaska Legislature were too restrictive.
Palin has said a plan by ConocoPhillips won’t be considered because it doesn’t follow the state’s rules for permitting, financing and construction. ConocoPhillips, the biggest oil producer in Alaska, could still participate in a project, she said.
The case is Exxon Mobil Corp. v. State of Alaska, 3AN-06- 13751, Alaska Superior Court (Anchorage)./By Tony Hopfinger — Bloomberg