39 years in the making, Exxon hopes Point Thomson is down payment on a gas line

Thirty-nine years after it was first discovered, Exxon Mobil’s Point Thomson field on the North Slope started production this spring.

The field sits on the coast about 60 miles east of Prudhoe Bay, near the edge of the Arctic National Wildlife Refuge. When it’s fully online, it’ll send about 10,000 barrels a day of diesel-like oil down the trans-Alaska pipeline.

But Exxon sees the field as a down payment on a much bigger prize: a North Slope gas line.

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Cory Quarles is new to Alaska — he only moved to Anchorage about a year ago, to become Exxon Mobil’s production manager in the state.

But the project he’s leading? That has history — as Quarles acknowledged when he spoke to the Resource Development Council in early May.

“Some of you may be wondering, OK, so ExxonMobil, what took you so long?” Quarles said, to laughter.

Point Thomson has been a long time coming. The field was first discovered in 1977. In 2006, Gov. Frank Murkowski’s administration, frustrated by the lack of development, tried to revoke the leases at the field, launching a seven-year legal battle. Three governors later, Gov. Sean Parnell approved the Point Thomson settlement in 2012, laying out a road map for development at the site.

This spring, after some four years and $4 billion, Exxon Mobil announced first production.

“This is an extremely big deal for us,” Quarles said, sitting in his office on C Street in Anchorage, in what was his fifth media interview to tout the milestone. The field’s 10,000- barrels-a-day contribution to the trans-Alaska pipeline is certainly worth something, especially in this era of low throughput. But Quarles was clear: that is not the final goal.

“10,000 barrels per day is not the end game,” he said. “That’s not the end game. Point Thomson is a pre-investment for what’s to come.”

What’s to come, Exxon Mobil hopes, is an 800 mile pipeline carrying natural gas from the field (and from Prudhoe Bay, to the west) to Cook Inlet, for export to Asia and the rest of the world; that’s the Alaska LNG project.

Because while Point Thomson is producing liquids right now, it’s actually a gas field. And it’s not just any gas field. It is a huge gas field.

With up to 8 trillion cubic feet of natural gas, it holds about one fourth of the known gas reserves on the North Slope.

“So this is massive,” Quarles said. “This would be considered a world class type of field. So that’s the prize. That’s how big it is.”

But right now, Point Thomson a gas field without a gas line. Negotiations on the Alaska LNG project are stalled, held up by low oil prices and disagreements among the partners: Exxon Mobil, BP, ConocoPhillips, and, of course, the state of Alaska.

Under the current plan, the four partners would make a final decision on whether to go ahead with the project by about 2019 — but that now seems optimistic.

That might not matter to Exxon Mobil.

Charles Ebinger is with the Brookings Institution in Washington, DC. He said, even if the gas line is delayed by a decade or more, it’s probably still worth it for the company.

“These companies really do think in 20 to 30 year time horizons, in terms of ‘What’s our energy portfolio going to look like?'” Ebinger said. “So it’s not that far out in Exxon’s time horizon.”

The bottom line, he says, is Exxon Mobil clearly believes there will be a natural gas line from the North Slope at some point.

In the meantime, the company is cycling the gas at Point Thomson: it pumps the gas out of the ground, strips out liquids to send down the trans-Alaska pipeline, then re-injects the gas into the reservoir.

It’s a basic process used at fields the world over, but with one crucial twist: Point Thomson is one of the highest pressure reservoirs Exxon has ever developed — one of the highest pressure fields in the world, Quarles said. He compared the force inside the reservoir to having the entire weight of an elephant balanced on your thumb.

That makes for a major engineering challenge.

“While it’s not a new technology, it is a new application of existing technology,” Quarles said. “What you’re talking about is, piping that’s thicker than you’ve ever seen before. You know, the piping is three inches thick of steel – steel!”

The company is required to study the gas cycling for at least the next five years, as it seeks to prove to the Alaska Oil and Gas Conservation Commission that the field really is best used to produce gas — and not the liquids that are found with the gas in the reservoir. The commission, which is charged with ensuring that Alaska’s oil and gas resources aren’t wasted, currently classifies the field as an oil field. That would require any oil in the reservoir to be produced first — unless Exxon can prove that it isn’t technically or economically feasible. One major goal of the gas cycling is just to learn how a field like this works.

And Exxon is out to prove something else, too. The field opens up a new region of the North Slope, and Quarles says the company wants it to be a role model for future development.

“There are no other fields producing this far east,” he said. “It demonstrates oil and gas production can occur safely and responsibly even in a very remote area…to where you could potentially unlock even other fields that far east.”

What’s east of Point Thomson, of course, is the prize many oil and gas explorers — and Alaska officials — have eyed for ages: the Arctic National Wildlife Refuge.