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.

IT again submitted a development plan in February after Lalska's governor Sarah Palin's administration moved to evict the company and its partners from the field  and auction drilling rights for Point Thomson to speed up the development of gas reserves, valued at $84 billion at current prices, in view of the more than doubling of residential gas prices in Alaska as demand has outpaced new supply sources.

ExxonMobil's latest development plan would have cost as much as drilling 10 to 12 deepwater oil wells in the Gulf of Mexico and aimed at starting work at the end of 2008 or early 2009 with production of 200 million cubic feet of gas and 10,000 barrels of condensate a day scheduled for 2014, if a pipeline were to be in place.
The proposal involves a $1.2-billion gas recycling and condensate production project developed over six years. Exxon claims that it has already secured a drilling rig and plans to begin development this year.

Earlier this month, BP and ConocoPhillips announced they would prepare to start raising investment for the gas pipeline from interested shippers in 2010. Separately, TransCanada Corp. has submitted its own pipeline plans to the state.

Exxon Mobil is involved in a $12-billion legal battle with Venezuela's state energy company over the government's seizure of an oil field. It is also fighjting to prevent Russia from gaining control over gas from a $17-billion Pacific Ocean project.