27-01-09 The state of Alaska will issue key permits for drilling of the first two wells in a $ 1.3 bn gas cycling and condensate production project ExxonMobil plans at Point Thomson, 60 miles east of Prudhoe Bay, state Commissioner of Natural Resources, Tom Irwin, announced.
Irwin's decision is a key breakthrough in the resolution of a long-standing, contentious dispute between the state and Point Thomson leaseholders, which include BP, Chevron and ConocoPhillips as well as ExxonMobil, which is the operator, because it will allow drilling to start at the undeveloped field.

Point Thomson holds an estimated 8 tcf of gas and 200 mm barrels of liquid condensates that were discovered in the 1960s and 1970s, but not developed due to lack of a gas pipeline and technical issues with the Point Thomson gas reservoir.
The state had moved to cancel company leases over a disagreement on past work obligations. ExxonMobil proposed the gas cycling and condensate production project as a remedy to the dispute. Thestate initially rejected the proposal and negotiations have been ongoing. Hoping for an agreement, ExxonMobil and its partners have spent $ 130 mm in preparations for the drilling including $ 40 mm in modifications to Nabors Alaska Drilling's Rig 19-E.

Irwin's decision involves permission to drill two wells on two of the leases affected by the dispute, but the action opens the door to resolution of drilling on the remaining leases. The commissioner said he was convinced to change his position after the companies offered "specific evidence that they have unconditionally committed to drilling two wells on two leases, initially initiating drilling operations this winter, completing two wells by 2010, and unconditionally committed to commencing production from the two wells by 2014."
ExxonMobil plans to produce 10,000 bpd of liquid condensates and inject produced gas in a gas cycling operation. Liquids would be transported through a new pipeline to the Trans-Alaska Pipeline System at Prudhoe Bay where theywould be mingled with crude oil now flowing through TAPS.

A resolution of the lease dispute is considered critical to development of the natural gas pipeline from Alaska to the continental US.
That is because the 8 tcf of gas resources at Point Thomson are a large percentage of the 35 tcf of known gas resources on the North Slope needed for the pipeline.