Brennan: A bird in the hand

By Tom Brennan

News that ExxonMobil might send its Point Thomson gas to Prudhoe Bay seems a very positive development.

It could mean bad news for a gas pipeline in the near term, but that project seems a long-shot possibility for the time being. And Alaska could use some near-term good news right now.

Redirecting Point Thomson’s huge gas reserves to Prudhoe Bay, including a massive volume of natural gas liquids, could mean a sizable increase in daily production of crude oil in the aging discovery field, which still has great potential. And 50,000 barrels of gas liquids in the near term could provide a nice economic boost at a time when the state could really use one. If the gas were available today it would boost North Slope oil production by something in the neighborhood of 10 percent.

ExxonMobil has been holding off on committing Point Thomson gas to a destination pending a decision on construction of a gas pipeline from the North Slope to Cook Inlet. But the time is fast approaching when a decision needs to be made. ExxonMobil has commitments to both the state of Alaska and its own shareholders to develop the Point Thomson reserves in the best interests of both.

Within a few years, Point Thomson could be producing an additional 50,000 barrels per day of gas liquids, which would boost crude oil output by about 10 percent from present throughput. It will also be capable of producing something like 920 million cubic feet a day of gas in gaseous form, which would one day be shipped south in a more conventional gas pipeline.

The Point Thomson Field contains approximately 8 trillion cubic feet of gas, about 25 percent of the proven gas reserves on the North Slope. Its current design is predicated on daily production of 10,000 barrels of condensate and 200 million barrels of gas per day. The condensate is expected to be mixed with crude oil and shipped south while the conventional gas is re-injected to maintain reservoir pressure.

Getting the gas from Point Thomson to Prudhoe Bay would require construction of a 32-inch pipeline about 62.5 miles between the fields, another valuable piece of oilfield infrastructure and a new job generator.

The Alaska Journal of Commerce reports that Point Thomson has one of the highest field pressures in the world, about 10,000 pounds per square inch. Because of that massive pressure, the Journal reports, the gas liquids are easily separated from the gas itself. When the pressure is relieved, the liquids virtually fall out of the gas/liquids mix.

Those characteristics make Point Thomson a valuable addition to the North Slope’s production mix and getting the gas online should be a high priority for the state. I suspect that since the gas pipeline is so close to Gov. Bill Walker’s heart he may drag his feet at the prospect of doing anything that might weaken the case for the main gas pipeline, but this could well be one of those times when a bird in the hand is much more valuable than one in the bush.

The North Slope still has tremendous reserves of both oil and gas. Managing both to get maximum value for the state and its people can often require difficult decisions.

This looks like one of those times.

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