Exxon's latest plans for development of Alaskan gas field rejected

23 April 2008

ExxonMobil's plans to invest $1.3 billion to develop the North Slope natural-gas project at teh Point Thompson gas field in Alaska suffered a blow yesterday as the Alaska Department of Natural Resources refused to approve the development plans, citing years of inactivity despite having submitted 22 development plans in the past.

Alaska Natural Resources Commissioner Tom Irwin stated that he did not trust the companies to follow through on their development committments in view of the history of the project and therfore an approval was not in the best interest of the state.

Exxon and its partners -- BP Plc, ConocoPhillips Corp and Chevron Corp had purchased leases 31 years ago allowing them to drill at Point Thomson. However, the reserves have been dormant since their discovery in the 1970s as the companies did not move head with the development even after having modified their development proposals 22 times.

Since the consortium failed to undertake the project, the state of Alaska moved to reclaim the leases in October 2006 and allow other bidders to develop Point Thomson, which is estimated to contain nearly one-fourth of the North Slope's 35 trillion cubic feet of natural gas reserves and  another 200 million barrels of oil. Once developed, the gas field would be a major supplier for any proposed Alaska natural gas pipeline.

Exxon has warned the state of protracted litigation saying it would "pursue all alternatives to protect our rights to develop these resources,"  if the lease were to be cancelled. Instead the consortoum partners  argued that the Point Thompson gas field cannot be profitably developed until a pipeline to carry Alaska North Slope gas to the rest of the United States is constructed.

Exxon had filed a lawsuit over the state's proposal to cancel its lease, which an Alaska court rejected in May 2007, but ordered the state and the the consortium partners to make a final attempt to resolve the impasse.