Finally? First Mustang oil targeted for April

  • Crude oil is loaded to a tanker truck at the Mustang Operations Center near the Kuparuk River field on the North Slope. Brooks Range Petroleum Corp., which has been struggling to bring the Mustang field online for six years, hopes to have first oil in April if a short pipeline to the Alpine infrastructure can be completed in time. (Photo/Courtesy/Alaska Industrial Development and Export Authority)

If the Arctic winter allows, Alaska will have a new producing oil field by spring, according to Brooks Range Petroleum CEO Bart Armfield.

The Mustang oil project Armfield’s company has been plugging away at for more than six years is finally ready to come together after years of challenges, he said.

The progress on the Slope coincides with changes to the company structure. The leaders of Brooks Range’s parent companies, Thyssen Petroleum Inc. and Alpha Energy Holdings Ltd., are in the process of finalizing a merger to become a single, publicly traded entity on the Singapore exchange, Armfield said.

What the resulting company will be called is still being decided, but the merger is expected to be finalized in mid-January.

As for the work on the North Slope, “We plan to have a drilling rig on location after the first of the year. We plan to drill a Mustang lateral (well) and we plan to have facilities on site and production in April,” Armfield said in a Dec. 11 interview.

“At that point we go from working interest owners to shareholders.”

The Mustang project is in the small Southern Miluveach Unit on the southwest edge of the large Kuparuk River Unit. It’s estimated to hold 22 million barrels of proven reserves, according Brooks Range. Peak production estimates for the field have been in the range of 12,000 barrels per day.

However, initial plans are to install a modular early production facility, or EPF, capable of processing up to about 6,000 barrels per day to begin producing oil without the larger expenses of permanent facilities.

“Parts of it are here; parts of it are in Houston and parts of it are in Calgary,” Armfield said of the EPF, which should arrive on the Slope early next year.

Brooks Range has been working on Mustang for years, though the project has gone through fits and starts since oil prices collapsed starting in late 2014.

“The twice veto of the tax credits as well as oil going from $120 to $30 — it has created significant difficulties in shareholder confidence and working interest owner confidence relative to funding,” he said.

Brooks Range is owed roughly $22 million in refundable oil and gas tax credits, according to Armfield. The state Department of Revenue gave a unique loan of roughly that amount in 2015 to the entity controlling the Mustang Operations Center-1, mostly owned by the Alaska Industrial Development and Export Authority, to keep advancing the project.

The company also partnered with AIDEA on the $70 million of early investments in the pad infrastructure and a larger, permanent processing facility in 2012 and 2014.

AIDEA transferred those investments to Brooks Range’s parent companies earlier this year through an owner-financed sale of its equity in Mustang.

Whether oil will begin flowing from Mustang in April will largely be decided by what kind of winter it is on the North Slope.

Brooks Range needs to install a roughly 1,100-foot pipeline to tie Mustang to ConocoPhillips’ larger Alpine transport line. Getting that work done is dependent upon being able to build an ice road along the pipeline route, which so far has been delayed by a warm and late-arriving winter, Armfield said.

An earlier plan to truck oil for a short time until the Mustang pipeline is finished was nixed by the company to maximize the economics of that first production instead of pressing to get to first oil as soon as possible.

Armfield said that decision was made in conjunction with Alaska Division of Oil and Gas officials who have been closely monitoring the slowly advancing project with a critical eye.

The lateral well Brooks Range plans to drill this winter in addition to the pipeline work will ready the MO-1 well for production.

“MO-1 is a well that we have right on top of the Kuparuk (formation) that we plan to drill the 6,000-foot horizontal in so that will give us three wells,” Armfield said.

Initial production should be “at least a couple thousand barrels a day,” he added, with more oil coming after four new wells are drilled later this year.

The hope is those additional wells will max out the 6,000 barrels per day EPF.

“If that’s achieved then we make the decision on the larger, 15,000 barrels per day facility or do we just expand the existing EPF,” he said.

Elwood Brehmer can be reached at [email protected].

12/13/2018 - 11:49am