Sunday, November 9, 2014

Joint venture enables production at Mustang

By Tim Bradner
Alaska Journal of Commerce

Brooks Range Petroleum will begin drilling this winter on production wells for the new Mustang oil field on the North Slope. The first release of funding from investors, which includes the Alaska Industrial Development and Export Authority, was made Oct. 29 and will finance the drilling as well as development of an oil and gas processing facility and connecting pipelines.

Mustang is expected to produce about 9,000 barrels per day, or b/d, in 2016 with that increasing to about 12,000 b/d in 2017, Brooks Range Chief Operating Officer Bart Armfield has said. Production will be from the Southern Miluveach Unit west of the Kuparuk River field.

In a press release, Brooks Range said AIDEA, the state’s development corporation, and CES Oil Services, a subsidiary of Charisma Energy Services Ltd. of Singapore, will own the processing facility through Mustang Operations Center 1, LLC. Brooks Range Petroleum Corp. will be the Mustang field operator and will build and operate the facility, Armfield said.

The process plant and pipelines are expected to cost between $200 million and $225 million, he said. Total costs, including drilling, are expected to be $500 million.

“We are very pleased to take this important step and to move forward with the construction of the production facility for the Mustang field,” Armfield said.

AIDEA will invest $50 million in the processing plant in addition to $20 million AIDEA previously invested with partners in a Mustang access road and gravel pad, will will bring the state’s total investment to $70 million.

This is the first equity investment by AlDEA in upstream production infrastructure. The authority’s previous oil infrastructure investment, also done with partners, was in a jack-up rig to do Cook Inlet exploration drilling.

The Mustang plant will be the first independently-owned, open-access production facility on the North Slope.

“The Mustang facility will enable companies operating on the North Slope to economically develop additional fields in a highly prospective area that to date has remained relatively underexplored.” Armfield said in the statement.

This is significant because independent companies exploring on the North Slope have had difficulty negotiating access to process facilities in producing fields that are owned by BP, ConocoPhillips and ExxonMobil, major operators on the Slope. This limitation motivated AIDEA to help finance an independent open-access process plant, AIDEA officials have said.

The plant is being designed to handle 15,000 barrels per day, to leave capacity available for production that would come from new discoveries, separate from the Mustang field. Armfield has said that Brooks Range has nearby prospects it intends to test once Mustang is operating, and companies are exploring and making discoveries in the immediate area. Those include Repsol, which plans to drill three evaluation wells this winter to evaluate discoveries the company made two years ago.

Previously AIDEA, the state authority, has mainly financed infrastructure like access roads for mining projects and ports, although it is also now investing in a small liquefied natural gas plant at Prudhoe Bay that will ship LNG by truck to Fairbanks, in Interior Alaska.

Armfield said production from the Mustang field would not have been possible without the project financing provided by the AIDEA-CES partnership.

“Because of AIDEA, BRPC was able to secure hundreds of millions in private investment to pursue additional development drilling at Mustang.” Armfield said.

This project will boost the state’s economy, create hundreds of new jobs, and generate significant revenue for the state.

“More drilling means more jobs, more production, and more revenue for the State of Alaska,” Armfield said. “This project will generate 50 jobs related to design and engineering, environmental permitting and services; 250 construction jobs; 20 to 25 full-time operations positions and up to 200 indirect long-term jobs.

“AIDEA’s overall $70 million investment is estimated to leverage more than $500 million of private investment in Mustang Field development. We are entering an exciting new era on the North Slope. With this project, Alaska is beginning to see the fruits of Senate Bill 21 (the state’s 2013 oil tax reform legislation) which, when combined with AIDEA’s willingness to work with independent oil and gas companies, will unleash the vast potential that remains untapped on the North Slope.”

Although exploration and development planning had been underway for Mustang prior to the Legislature’s passage of SB 21 the enactment of the tax changes created a more favorable long-term economic environment for production, which helped Brooks Range secure the final package of investment for the field development.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/November-Issue-2-2014/Joint-venture-enables-production-at-Mustang