Tuesday, November 13, 2012

AIDEA may finance infrastructure at Mustang

Tim Bradner
Alaska Journal of Commerce

The Alaska Industrial Development and Export Authority, the state development corporation, is working on a plan to finance production infrastructure for a small North Slope oil field being developed by Brooks Range Petroleum LLC, an Alaska-based independent company.

It is the first time the state authority has invested directly in oil production support infrastructure, although AIDEA has long invested in infrastructure for mining.

Brooks Range is developing its 44-million-barrel Mustang discovery west of the Kuparuk River field and hopes to have the field in production in early 2014, company COO Bart Armfield said.

The company is jointly owned by Alaska Venture Capital Group, a consortium of U.S. independents, and Ramshorn Investments Inc., a subsidiary of Nabors Industries.

Brooks Range has worked out an agreement with AIDEA to finance and own a 4.1-mile gravel access road and gravel pad for production facilities.

AIDEA’s board has approved initial steps in the financing, which is to be for $20 million. The board will give a final approval to the project at its December meeting, according to Karsten Rodvik, spokesman for the authority.

The road and pad would be built this winter and be ready for construction of field facilities in late 2013 and early 2014, Armfield said.

The plan is for AIDEA to own the road and pad and charge Brooks Range, or other companies working in the area, fees to use the facilities.

The state authority now owns and operates infrastructure that supports mining, such as a port on the Chukchi Sea and a 57-mile access road to the Red Dog lead-zinc mine in northwest Alaska, but this is the first time the state will have invested in oil industry production infrastructure.

AIDEA also owns an ore terminal and loading facility in Sakgway that is used by mining companies shipping ore from Yukon Territory.

In the oil sector, the authority has also invested in a jack-up rig that is now in Cook Inlet, in southcentral Alaska. AIDEA invested 30 million of an $80 million project to purchase and refurbish the Endeavour jack-up rig in a partnership with Buccaneer Energy of Australia and Ezion Holdings of Singapore.

Armfield said a second phase of the Mustang development being discussed with AIDEA that would have the authority finance and own a proposed $180 million oil processing facility that would process oil from the field. Capital expenditures for the total project are estimated at $550 million.

If the project goes ahead, AIDEA’s rules would require it to make the facility available to other companies exploring in the area. Repsol, for example, is now drilling exploration wells nearby. Brooks Range itself will be drilling a delineation well further west this winter to test a discovery made in 2008 at its Tofkat well, Armfield said.

Mustang would produce an estimated 15,000 barrels per day at peak and is located near the existing Alpine pipeline, a common carrier crude oil pipeline. That is convenient for any companies using the proposed plant to process produced oil.

Access by independent explorers to processing facilities has been a major problem on the North Slope for companies. Most of the existing production plants and industry infrastructure on the North Slope is in the large producing fields and gaining access to the facilities has required lengthy and complex negotiations.

This was a particular problem for Pioneer Oil and Gas when it developed its Ooogururuk field near the large Kuparuk field, Pioneer has said previously. ConocoPhillips, operator of the Kuparuk field, has said that making facilities available for third parties makes sense in some cases but it must be gone without causing complications for operations of the plants.

Another company new to the slope, Eni Oil and Gas, opted to build its own small processing facility for Nikaitchuq, another small field, to avoid having to work with owners of the major fields even though spare capacity was available in processing plants in the large fields.

Having AIDEA own a plant and make it available will be a help to independent explorers, particularly small ones. Armfield said that the plant will be designed to be expanded in modular increments.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/November-Issue-2-2012/AIDEA-may-finance-infrastructure-at-Mustang/#ixzz2C5WbstaF