State announces preliminary gas purchase agreement for ExxonMobil, Alaska gas line

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ANCHORAGE (KTUU) - The state’s natural gas pipeline project and a major gas producer in the state have announced agreements for purchasing gas from Prudhoe Bay and Point Thomson, and to sync up the production goals for Point Thomson, of one of the state’s largest gas fields, with the gas line project.

"What's critical is the market now sees that gas is available for the project," Gov. Bill Walker said after a governor's debate in downtown Anchorage.

A Gas Sales Precedent Agreement was signed by the Alaska Gasline Development Corp. and ExxonMobil Monday morning, while a Letter of Understanding was signed by the Alaska Department of Natural Resources, ExxonMobil and BP to better align the Point Thomson field’s production timeline with the Alaska LNG project, which is run by AGDC.

In an email release, the Alaska Gasline Development Corp. says it anticipates purchasing ExxonMobil’s share of 30 trillion cubic feet of gas from the two fields. The Alaska Department of Natural Resources says Point Thomson contains approximately 25 percent of the North Slope’s discovered natural gas resources.

"This precedent agreement is good for Alaska and ExxonMobil and represents a significant milestone to help advance the state-led gasline project," said ExxonMobil Alaska president Darlene Gates in a press release. "As the largest holder of discovered gas resources on the North Slope, ExxonMobil has been working for decades to tackle the challenges of bringing Alaska's gas to market," she continued.

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Exxon is a key piece of the deal, and the largest field owner. Walker says potential buyers in Asia had asked him as recently as last week about the company's involvement.

"They wanted to know about Exxon's levels of engagement, we knew we were getting close but we couldn't say anything quite yet, but it was important for them to know where Exxon was on this project," Walker said. "So now I have advised them of them today's announcement and I think they'll very pleased with hearing this news."

Point Thomson began producing gas in 2016, after the state settled with the field’s owners – ExxonMobil with a 62.7 percent share, BP with 31.93 percent share, and ConocoPhllips with 4.94 percent share – to establish a timeline for production in 2012. That timeline is what DNR says will now be more closely aligned with the Alaska LNG project. That 2012 settlement established a 2019 deadline to increase production, but under the agreement, that deadline will be extended as long as the Alaska LNG Project is moving forward.

"This agreement continues to demand that our resources at Point Thomson are developed to the maximum benefit of all Alaskans, and also aligns the state and industry in a new way as the Alaska LNG Project advances," said DNR commissioner Andy Mack in a press release.

In an interview Monday afternoon Mack said the deal provides Exxon some "flexibility."

"Based on their demonstration of commitment through their own work with AGDC we've provided them some flexibility so long as they keep working toward some of the foundation agreements that need to be met to support the project."

AGDC came to an agreement with BP in May of this year.

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