New deal for idled North Slope oil project in the works

A cash-starved North Slope oil project could again have new owners with hopes of resuming production later this year.

Majid Jourabchi, CEO of Houston-based Thyssen Petroleum, said May 20 that he is part of a team attempting to buy majority ownership in the long-delayed Mustang oil project from investors in Caracol Petroleum, the primary owner.

Alpha Energy, through its subsidiary Caracol, has failed to make good on payment commitments to the Alaska Industrial Development and Export Authority for months. Singapore-based Alpha most recently missed an April 15 deadline to put a $60 million investment into Mustang, according to AIDEA spokesman Karsten Rodvik.

The cash infusion into the project was part of a loan agreement the AIDEA board approved changes to in January after Caracol missed its first two quarterly loan payments starting last year.

The loan was a modification of AIDEA’s $70 million total investment made in two tranches in 2012 and 2014 in the holding companies set up for the Mustang project’s infrastructure development.

Rodvik wrote via email that the current volatility of oil markets has caused additional challenges for the project and the authority is reviewing its alternatives as a creditor to Mustang.

The AIDEA board of directors discussed the project in an executive session during its May 20 meeting.

Anchorage-based Brooks Range Petroleum — jointly owned by Thyssen and Caracol — operates the project.

The current ownership group is the latest in a series of convoluted structures since oil prices first fell in 2014 and funding for the project became scarce.

Brooks Range briefly started production from the small field in early November through temporary modular facilities after years of delays brought on by collapsed oil prices and other financing challenges.

Alaska Oil and Gas Conservation Commission records show Brooks Range produced an average of 478 barrels of oil over 23 days from the well in November.

However, production has been shut in since.

The Mustang project is adjacent to the southern portion of ConocoPhillips’ large Kuparuk River field and also near the Nanushuk oil project being developed by Oil Search. The field is estimated to hold about 22 million barrels of oil and could peak at production rates of about 12,000 barrels per day when fully developed.

Jourabchi, who said he is a shareholder in Alpha and is on the investment firm’s board of directors, said his group has plans to resume work at Mustang in the coming months and restart production late in the year if they are able to buy the project from Caracol and oil prices continue to recover.

He declined to provide more information on the situation, saying it could compromise the negotiations.

“We’re trying to bring ownership back to the North Slope,” he said.

Alaska North Slope crude is selling for about $30 per barrel and prices are generally starting to recover following the market shocks of the COVID-19 pandemic and the Saudi-Russia price war.

Representatives for Alpha and Caracol could not be reached.

Elwood Brehmer can be reached at [email protected].

05/26/2020 - 10:56am