Technical problems thwarting ExxonMobil’s Alaska goals

ExxonMobil has acknowledged technical problems at its Point Thomson gas cycling and condensate production project east of Prudhoe Bay, on the North Slope. These have prevented the project from meeting production goals, the company has told state officials in briefings.

The project is 60 miles east of Prudhoe Bay and was built at a cost of over $4 billion by ExxonMobil and BP, the Point Thomson majority owners, but has so far failed to reach a consistent rate of 10,000 barrels per day of liquid condensates that was its goal in agreements with the state, according to correspondence between the state and the company.

Condensate is a natural gas liquid which, like propane, butane and other gas liquids, are commonly found entrained in natural gas when it is produced.

So far the state seems willing to give ExxonMobil a pass on the shortfall. “The Division of Oil and Gas recognizes Exxon is working diligently to achieve this rate of production,” division director Chantal Walsh said last Tuesday.

Elizabeth Bluemink, spokeswoman for the state Department of Natural Resources, said “The company has achieved that level of production a number of times but the mechanical aspects of keeping it going are challenging.”

The state has also pointed out, however, that drilling and other commitments agreed with the state were not accomplished.

ExxonMobil has said previously it is in full compliance with a 2012 settlement of litigation with the state, which included commitments to build the present Point Thomson project.

Still, there’s apprehension on what position Alaska Gov. Bill Walker will take on the issue. Walker has been a fierce critic of ExxonMobil over Point Thomson and of the legal settlement.

About 8 trillion cubic feet of gas and 200 million barrels of condensate liquids were discovered at Point Thomson in 1975 but only recently developed. ExxonMobil built the present project in 2013 and 2014 to produce condensates, and reinjecting produced gas, mainly to comply with the legal settlement. It was also hoped to be a phase one of a large gas pipeline and liquefied natural gas export project, but that now seems years off.

The technical problem, meanwhile, is with a compressor designed to inject 200 million cubic feet per day of produced gas back into the high-pressure reservoir, which is at 10,000 pounds per square inch. That pressure is about twice as high as the original Prudhoe Bay field reservoir pressure. Injecting gas under those conditions requires even higher pressures to overcome the natural reservoir pressure.

To inject the gas ExxonMobil had to develop leading-edge compression technology, which the company described it as an “industry first” in its correspondence with the state.

Gas cycling involves producing the gas, which is “wet” and enriched with liquids, stripping off the condensates and injecting “lean”, or dry, gas back into the reservoir. As the lean gas moves through the reservoir rocks to the gas producing wells it soaks up liquids again. The gas is produced, the liquids stripped once again, and the process is repeated, or cycled.

Meanwhile, ExxonMobil has presented a plan to the state to expand liquids production to 50,000 barrels per day and build a 60-mile new gas pipeline to Prudhoe Bay, which would move 870 million cubic feet per day of Point Thomson gas to Prudhoe help repressure that field, producing more oil. This would ease the problem of injecting high-pressure gas and allow liquids production to be ramped up.

People briefed on the technical problems, asking not to be identified, said the Point Thomson operators experience difficulty extracting liquids when the gas compression pressures are high. Reducing the need to inject the gas, by shipping it to Prudhoe, would allow more liquids to be produced.

The state Division of Oil and Gas is holding off on approval of ExxonMobil’s plan, however, until the company submits more details, which are expected by Oct. 13.

There are also concerns, however, over whether the governor will deem the expansion project in full compliance with the 2012 settlement, although that agreement includes an option shipping gas to Prudhoe if the Alaska LNG Project option is not available.

Walker, as a private citizen opposed the 2012 settlement before he was elected governor in 2014. He also filed his own citizen lawsuit to stop the settlement, which was unsuccessful, and had also advocated the state taking back the Point Thomson leases, and ownership of the gas, arguing ExxonMobil had showed lack of diligence in developing its discovery.

The governor, and his former Attorney General, Craig Richards, had argued that ExxonMobil and other state oil and gas leaseholders have a duty to produce the resources if an offer was made to purchase gas and an economically viable gas pipeline project is available.

Irked by ExxonMobil’s lax pace in development, the state moved in 2006 to take back its leases. ExxonMobil and BP sued to stop the state’s action, arguing that lack of a gas pipeline impeded any development of gas.

The state contended that the companies could have tackled conventional oil in the area as well as the liquid condensates. ExxonMobil had done earlier work in 1999 on a large gas cycling and condensate project but concluded it uneconomic.

The state disagreed, arguing the two companies did not seriously consider a smaller project or other alternatives, and were just dragging their feet.

ExxonMobil felt it had a good case in court for halting the state’s seizure of its leases but ultimately decided to not take chances with an Alaskan judge and jury. The 2012 settlement led to construction of the current cycling and condensate project.