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Alaska, Exxon deal opens way for LNG exports

PublishDate:2012-06-11 Source: Author:

ANCHORAGE, Alaska (Reuters) - Alaska has reached a settlement with Exxon Mobil Corp and its partners to develop a huge, long-fallow oil and gas field, possibly paving the way for a $26 billion pipeline and an export plant for liquefied natural gas.

The settlement, which resolves a long-running lease dispute over the Point Thomson field about 60 miles east of Prudhoe Bay, could allow for exports of liquefied natural gas via tanker to Asia and may boost Alaskan oil production after decades of decline.

In exchange for continued lease control, operator Exxon and partners BP and ConocoPhillips have agreed to build a pipeline from the field to deliver 70,000 barrels per day of liquids into the Trans Alaska Pipeline System.

The settlement also calls for the companies to produce 10,000 barrels per day of natural-gas condensates by the winter of 2015-16, state officials said.

The deal is a boon for TransCanada , which plans to build a natural gas pipeline from Alaska's North Slope to the south coast, feeding a possible export plant that would ship gas to thirsty markets in Asia.

Alaska Governor Sean Parnell said the companies had agreed to work with TransCanada Corp on the new pipeline project, which proposes to export gas just as Alaska's 40-year-old and only existing LNG plant at Kenai closes down.

Point Thomson holds about 8 trillion cubic feet of natural gas, and the companies are expected to join a growing list of U.S. projects aiming to export LNG as domestic production soars. However, it is not yet clear how many of those projects U.S. regulators will ultimately approve.

"Alaska's resources will be produced from Point Thomson rather than remaining locked underground," Parnell said at a news conference in Anchorage.

The field has been the subject of years of dispute, with the state saying the companies have delayed meaningful development of the liquids.

State officials started legal action to take back the leases in 2006 and had said they planned to auction them off to other developers. The companies took legal action to stop that termination, including a lawsuit that reached the state Supreme Court.

Resolving the Point Thomson lease dispute will help the parties progress toward a long-desired North Slope natural gas pipeline, according to the settlement agreement.

"A Major Gas Sale off the North Slope of Alaska is a primary goal of the Parties," said the agreement, released by state officials. "The Parties believe settlement of the Point Thomson litigation will assist in progressing a Major Gas Sale."

TransCanada said its Alaska pipeline project, which could take gas from Point Thomson, would concentrate on the LNG export option.

Alaska Natural Resources Commissioner Dan Sullivan said the settlement required the three companies -- the major North Slope oil producers -- to reach specific development goals in order to keep their leases.

"The companies are on the clock ... the settlement has many dates and timelines that have to be met," Sullivan said. "Without production, the leases at Point Thomson will terminate," he said.

(Writing by Edward McAllister; Editing by Dale Hudson and Mark Porter)

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