Exxon is going big in Alaska.
With memories still raw a quarter-century after the Exxon Valdez oil spill and the litigation that followed, Exxon Mobil Corp. now holds the reins to a pair of projects considered pivotal to the state’s future.
And that puts the global oil giant in an odd position: In addition to producing hydrocarbons, it’s working to regain public trust.
On Thursday, as part of an effort to increase transparency, Exxon flew journalists to see the largest development underway on the North Slope: the $4 billion Point Thomson gas field near the fiercely protected Arctic National Wildlife Refuge.
With frenetic construction work temporarily slowed, it was the first time members of the media could safely visit the site, Exxon officials said.
Hugging the edge of the Arctic Ocean 60 miles from the nearest village — and 60 miles from the Prudhoe Bay oil patch — the field is unusually remote.
The introductory workers’ handbook doesn’t flinch, even with glints of humor: When it comes to the environment, what should you expect? Think of an island in Hawaii. Then think of the opposite.
Temperatures once dropped to 66 below and the place can feel, says the handbook, like a “remote outpost on the dark side of the moon.”
But in fewer than two years — after Exxon won a key federal permit — a shiny oil field village has sprung from the tundra.
It wasn’t easy. Materials had to be brought in by ice roads, barge and helicopter until an airstrip was completed last fall. Gravel 6- to 8-feet thick had to be excavated from tundra and laid down to protect the permafrost.
But on the 55-acre pad you’ll now find hotel-like buildings containing 540 beds, a buffet line and a gym with a sauna. There’s cellphone service, spill-response equipment, even a sophisticated ground radar system that scans the coast for polar bears.
But if you forgot something, “you’d better learn to live without it,” the handbook advises.
The Exxon official who has managed the project the last five years, Sofia Wong, told reporters on the media tour why Exxon was investing so much in what she considers “the middle of nowhere.
“The answer is we have a world-class reservoir right under our feet.”
LNG in mind
Development began after the state decided to terminate the Point Thomson unit lease in 2006, after Exxon had refused to develop the field for three decades — another sore spot for Alaskans. That led to Exxon suing the state and an out-of-court settlement in 2011 that laid out a development plan.
Exxon would move forward with an initial phase of production, pulling 10,000 barrels a day of condensate oil from the natural gas. That gas must be cycled out of the ground and pumped back in because there’s currently no pipeline to carry it to market.
The condensate is a relatively small amount of oil compared to the roughly 500,000 barrels a day flowing through the pipeline now. But the scope of the development suggests Exxon has far greater plans: Commercializing Point Thomson’s huge cache of natural gas with the state’s long-sought gas line project.
The Alaska Liquefied Natural Gas project could cost up to $60 billion, officials said. It would commercially tap the North Slope’s vast stores of natural gas for the first time, selling the hydrocarbons to Asian utilities and other buyers.
Plans include the construction of an 800-mile pipeline, a North Slope production facility and a plant in Nikiski to liquefy the gas so it can be shipped overseas on tankers.
With the project still a decade from development, Exxon officials were cautiously optimistic Thursday. But they left no doubt about their long-term thinking.
“The real value of Point Thomson is in the natural gas development,” in an LNG project, said Christina Nordstrom, the field’s technical manager.
Point Thomson holds 8 trillion cubic feet of natural gas — enough to meet Alaska’s needs for 88 years. But giant Prudhoe Bay to the west holds three times that amount.
Exxon’s big stake in both fields makes it the North Slope’s largest gas holder, more than the state, BP and ConocoPhillips, all of whom are partners in the LNG project along with pipeline builder TransCanada.
That means Exxon has a starring role in an effort that Alaskans hope will one day provide the tax revenue to replace dwindling oil field income.
As a result, Exxon and Alaskans find themselves in an awkward partnership.
Joe Balash, the state’s Natural Resources commissioner, said the company is making progress but still has hurdles to overcome to rebuild trust with the public.
“Any Alaskan would be hard pressed to forget what happened,” he said. “The question is whether we learned from it and whether they learned from it. That’s something that is going to be key going forward.”
But Exxon has made important strides, said Balash. At Point Thomson, the company has exceeded the state’s expectations for Alaska hire, reported by Exxon to be 85 percent with more than 70 in-state companies participating.
Exxon also recently finished giving presentations about the LNG project in several communities, Balash said.
“The language they used, I thought, was very positive,” Balash said. “They described the owners of the Alaska LNG project as everyone in the room, all the Alaskans. It’s that kind of recognition that Alaskans need to hear.”
Lessons for Exxon from the spill
Wong felt some of the public’s concern when she moved to Alaska in 2009 with her family and began working on the project for Exxon. People said she’d leave Alaska in a matter of months.
At the time, it had only been a year since Exxon had won its long-running court battle with victims of the 1989 spill, with the Supreme Court reducing punitive damages to $500 million from $2.5 billion.
And it hadn’t been long since then-Gov. Sarah Palin had ridiculed Exxon for not partnering with BP and Conoco on a gas line project that was later shelved. A lot of Alaskans were probably happy and thinking, “Exxon, don’t let the door hit you in the stern on the way out,” Palin said at the time.
Wong remembers the 1989 spill in training workshops with employees, sharing a story that happened just after she moved here. Her family was visiting the Portage Glacier visitor’s center near Anchorage when her son showed her a display bottle of crude from the spill.
But it wasn’t collected 20 years earlier. The bottle said it had been recently found.
“Mom, I thought you guys cleaned that up,” said her 12-year-old son, Alex.
“I said, ‘You have to understand. Your mom’s new job here is going to be very tough,’ ” said Wong.
At trainings, she tells employees “the big elephant in the room is the Exxon Valdez. It’s important that we understand that. You need to keep your eye on the ball so it doesn’t happen again.”
The company’s focus on safety and protecting the environment at Point Thomson — Exxon’s first Alaska project as a field operator — seems omnipresent, even overblown at times.
Reporters in borrowed hard hats, reflective gear and safety glasses were warned to always hold handrails going down stairs so they wouldn’t slip. Disposable plastic gloves are required when spooning food at the cafeteria line.
Buildings are designed to reduce polar bear interactions, including with a human cage outside main doors — picture an Arctic entryway made of bars — so workers can safely scan surroundings before heading into the open.
“Spitting of chew on the ground is considered a spill,” the handbook warns, referring to a company rule that a tablespoon or more of any foreign substance must be reported if it hits the ground outside.
The company can’t afford even a small mistake, Wong said.
“It’s important to our future here in Alaska to be successful here,” she said.
Production date approaching
Point Thomson is about 18 months from producing its first drops of condensate.
A key step in the construction of the “little village,” as Wong called it, was the completion of a 22-mile, 12-inch, above-ground pipeline this spring. Builder Doyon Associated, owned by the Interior Native corporation Doyon Ltd., pumped more than $100 million into the Alaska economy to build the line, said president Warren Christian.
It will carry the liquid condensate into the trans-Alaska pipeline network that helps delivers Alaska crude oil to the Lower 48.
This winter, after the ground freezes and an ice service road can be built on the tundra, Doyon plans to build the 5-mile, 8-inch pipe that will deliver high-pressure gas from a production well as part of the gas cycling.
The pressure of that gas as it comes out of the ground created technical challenges that helped delay the field’s development for so long. To overcome them, the pipe will be built with state-of-the-art steel that’s especially durable and thick to handle pressure at 10,000 pounds per square inch — akin to having two pick-up trucks on your finger — with a special liner that helps prevent corrosion.
From there, the natural gas will flow into a series of large cylinders where the condensate, or oil, will be produced as it falls out due to gravity.
Adding to the complexity: Putting the natural gas back into the ground means increasing the pressure above 10,000 pounds so it can be forced back into the reservoir.
The sophisticated production modules and equipment that will do the condensate extraction and compression are currently being assembled in South Korea by Hyundai Heavy Industries. They are on track to be shipped to Alaska next summer.
Depending on what Exxon learns from the project’s first phase, it’s possible condensate production could be increased to as much as 70,000 barrels.
But perhaps most important to Alaskans is whether the development at Point Thomson will lead to the gas line project the state has sought for decades.
Wong will be working on that effort too, part of a growing group of employees as Exxon and partners conduct preliminary design and engineering work for the LNG project, both in Alaska and in Houston, Texas, where much of the expertise lies, Exxon officials said.
Wong said Exxon has worked hard to rebuild its relationship with the state, and stage agencies have worked hard to help advance the projects, Wong said.
But is the public ready to trust Exxon?
Balash said the old adage about forgiving but not forgetting might be useful to remember now.
“So far, so good,” he said of Exxon’s efforts. Then he added: “There’s a long way to go.”
Contact Alex DeMarban at email@example.com or on Google+
Related stories from around the North:
Canada: Canada ponders exceptions to relief well rule for Arctic oil drilling, Alaska Dispatch
Finland: Oil spill in northwest Finland worse than expected says WWF, Yle News
Russia: Oil companies push ahead with plans in Russia and Canada while sidelined in the U.S., Blog by Mia Bennett
United States: ExxonMobil has high expectations for Point Thomson oil production in Alaskan Arctic, Alaska Dispatch