AIDEA approves $50 million investment at Mustang field

Alaska’s state development corporation will invest $50 million in a $225 million oil processing facility for the planned Mustang oil field on the North Slope. The Alaska Industrial Development and Export Authority board approved the action April 24.

Alaska-based independent Brooks Range Petroleum is developing Mustang, which has an estimated 24 million barrels of recoverable oil and is to begin production in late 2015, according to Brooks Range Chief Operating Officer Bart Armfield. Peak production, expected to be reached by 2017, is estimated at 12,000 barrels per day, or b/d.

Production would increase to 15,000 b/d, the planned capacity of the process plant, in a second phase of drilling. Total development costs including the processing plant and development drilling of Mustang are estimated at $583 million, Armfield said.

Eleven production and 20 injection wells, for gas and water, are planned in the development.

Mustang is located between the Kuparuk River field and the Alpine fields, both producing. The deposit is in an advantageous location near the Alpine pipeline, a common carrier pipeline.

AIDEA already has $20 million invested in Mustang through the development of an access road and the gravel pad for the process plant, which were both built last year.

The field is expected to produce $300 million to $640 million in new state revenues and about $45 million in tax revenue to the North Slope Borough, the regional municipality, AIDEA’s deputy director for development, Jim Hemsath, told the authority’s board.

About 200 to 250 construction workers would be employed in building the plant and related infrastructure, 100 in drilling, 50 in engineering and design work and 20 to 25 in ongoing operations at the plant, according to information presented to the authority’s board.

The investment by AIDEA is structured to be temporary, with the state corporation being bought out by other partners within seven years, Hemsath said. During those years the authority will earn 10 percent on its investment, according to terms of the deal.

The deal is being structured so that the process facility, Mustang Operations Center 1, will be jointly owned by AIDEA and CES Oil Services Pte. Ltd., or CES, in a new company, MOC1, LLC. CES is a subsidiary of Charisma Energy Services, an affiliate company of Ezion Holdings, a Singapore-based investment firm active in energy.

Ezion is also AIDEA’s partner in the Endeavour jack-up rig in Cook Inlet. The new jointly-owned company will contract with Brooks Range to build and operate the plant. Brooks Range is also responsible for developing the field itself.

In a related development, Brooks Range is reported to be close to an agreement with a major new investor in the company’s projects, including Mustang. Details of the deal remain confidential but an announcement could be made in a few weeks.

Brooks Range is owned by Alaska Venture Capital Group, a consortium of small independents mostly based in Kansas. The company has been exploring on the North Slope for several years mostly targeting medium-sized prospects bypassed by major oil and gas companies.

11/21/2016 - 11:48am