ExxonMobil Announces Successful Drilling of Point Thomson Wells

(LINK) Exxon continues to invest in exploration for gas that will someday fill the Alaska Gas Pipeline - You've got to appreciate an outfit that's committed to Alaskan natural gas. The sums invested indicate that somebody at Exxon believes Alaska natural gas and the pipeline have a future. Nice job to everyone who worked hard to make the project a success.

ANCHORAGE, Alaska--(BUSINESS WIRE)--ExxonMobil announced today that it has successfully drilled and tested the PTU-15 and PTU-16 development wells for the Point Thomson project on Alaska’s North Slope, ahead of the year-end 2010 target.
“The successful drilling and testing of these wells represents a significant accomplishment and demonstrates we are delivering on our commitments,” said Alaska Production Manager Dale Pittman.

“Many Alaskans contributed to this milestone, completing work ahead of schedule in a safe and environmentally responsible manner.

Point Thomson is a remote natural gas and condensate field located on Alaska’s North Slope, approximately 60 miles east of Prudhoe Bay. It is estimated to hold about 25 percent of the North Slope’s discovered gas resources. Concurrent with the drilling of these two development wells, activities are also focused on engineering and environmental permitting which are critical for project development. To date about $1.5 billion, including more than $730 million in the last two years, has been invested in Point Thomson.

The Point Thomson project includes gas cycling facilities designed to recover hydrocarbon liquids and re-inject natural gas back into the reservoir, making Point Thomson the highest-pressure gas cycling operation in the world.

“The project is providing jobs and investment in Alaska,” said Pittman. “We are continuing to work with the State of Alaska to resolve outstanding issues in order to maintain the pace and momentum of Point Thomson development. Point Thomson gas is critical to the success of an Alaska gas
pipeline project.”

2010 Updated Assessment of Undiscovered Oil and Gas Resources of the National Petroleum Reserve in Alaska (NPRA)

2010 Updated Assessment of Undiscovered Oil and Gas Resources of the National Petroleum Reserve in Alaska (NPRA) (LINK)

Boom-A-Boon

Shale-gas boom a boon to Mackenzie pipeline hopes, minister says By Dave Cooper, Edmonton Journal (LINK)

"I think it will improve our chances for the pipeline because (the new gas supply) will stabilize the marketplace," Northwest Territories industry minister Bob McLeod said in an interview.

Stable prices + Stable Tax = Pipelines?

It's all about tax policy

From Platts (LINK):

An ExxonMobil executive said Tuesday the producer is optimistic that an Arctic natural gas pipeline will get built despite competition from shale, but said a major sticking point remains Alaska's tax and royalty policy.

"We take a long-term view on Alaska," said Steve Kirchhoff, ExxonMobil Gas and Power Marketing's vice president for the Americas. "The shale definitely does enter into that equation but a real fundamental issue at this point is we need to be able to sit down with the state and work through appropriate fiscal regimes that are going to make this work against a range of price forecasts."

ExxonMobil partnered with TransCanada on one of two proposals for a massive 48-inch-diameter pipeline from Prudhoe Bay to Alberta.

We're more or less back where we started 3 or 4 years ago. It's always been about tax rates vs. market rates.

Denali Open Season Ends 4-OCT-2010

Tomorrow marks the end of Denali's open season. Hundreds of millions have been spent on the Denali and the TransCanada open seasons, hopefully not in vain.

Three years down the road from passing the Alaska Gasline Inducement Act the world has changed a lot, mostly in ways that should make any sane person run like hell from this project - The international economy tanked, the price of oil and natural gas plummeted, and $6/MMBTU shale gas looks like it's here to stay. The pipeline contenders have experienced a wide range of fortunes over the past three years:

TransCanada - Continues to execute successful pipeline projects in North America like the Keystone pipeline - moving heavy Canadian petroleum products to the lower 48.

ExxonMobil - Earnings hit by declining commodity prices but now they are a big player in shale gas via acquisition of XTO. ExxonMobil is also adding Alaska Gas reserves by the bit up at Pt. Thomson. LNG, Shale Gas, Alaska Gas - it's all earning for ExxonMobil - they play to win.

ConocoPhillips - CEO James Mulva "re-evaluating the Alaska project in light of a glutted natural gas market" according to one report, followed by "Oh no - really we stand by the project" statements - I think the first story is closer to the truth, the re-eval will start next week.

BP - The Macondo blowout has cost BP at least $20billion and there's talk of a pull out from Alaska. It's unclear if a crippled BP brings anything positive to the table.

There's also some good news out there:

The shut-in price of Shale Gas seems to be holding at $6/MMBTU - I view that as solid base that will contain the Shale Gas glut.

The commodity price pendulum cuts both ways - Oil and Gas are cheap right now but STEEL is cheap right now. Engineers are cheap too and there are few major projects mopping up the excess - but watch out for the "recovery" when commodity prices recover.

Interest rates are out of this world cheap - Now is the best time in 30 years to fund a mega project.

I expect the pipeline project to continue sideways for at least the next year. Expect talk of project consolidation in the near term.