More Mustang funds
During its June 29 meeting the board of the Alaska Industrial Development and Export Authority passed a resolution approving an additional $2.5 million in funding assistance for Brooks Range Petroleum Corp.’s Mustang oil field development project on the North Slope. The funding, which comes from an AIDEA revolving fund, provides bridging finance for the completion of the field operations center, owned by a joint venture called Mustang Operations Center 1 LLC. The funding may be provided as equity or as a loan and comes with a condition that AIDEA, already an owner, will acquire a 100 percent membership interest in MOC1.
AIDEA has already invested $20 million for the construction of a gravel road and drilling pad at Mustang and $50 million in the processing facility.
Brooks Range Petroleum now hopes to bring the Mustang field into production towards the end of 2018, Bart Armfield, Brooks Range chief operating officer, told Petroleum News in a July 11 email.
The oil field at Mustang is modest in size but close to existing North Slope oil infrastructure, with the production pad being only about 650 feet from the Alpine oil pipeline. And the operations center has been designed with the potential to support other field developments in the same area of the Slope. The gravel pad and access road to the pad have been completed, as have most of the modules for the operations center. But, because of a shortage of funds in a deteriorating oil market the project has been on hold since early 2016, with the modules for the operations center staged in Canada and the United States.
A new planIn notes accompanying the new funding resolution, AIDEA said that Brooks Range has been working with John Hendrix, Gov. Bill Walker’s chief oil and gas advisor, and with a team of Alaska oilfield vendors and contractors, to develop a plan that leads to production status for the field through the completion of a certified well in the field before the end of the third quarter of this year. A previous program of development drilling in the field ran into technical problems because of high subsurface pressures.
The new $2.5 million in AIDEA funding will enable Mustang Operations Center 1 to preserve the completed equipment for the field, thus securing the original investment in the field and enabling the provision of critical surface infrastructure in support of new drilling, AIDEA says. The investment supports a policy initiative led by Hendrix and initiated by the board earlier in June to consolidate AIDEA control of critical North Slope infrastructure through Mustang Operations Center 1 and Mustang Road LLC, the owner of the Mustang access road and pad. The idea is to encourage more rapid and extensive independent oilfield development west of the Kuparuk River unit, an area that has seen recent exploration success, AIDEA says.
Consistent with AIDEA missionAIDEA sees its funding assistance for the Mustang field infrastructure as consistent with the agency’s mission to advance economic growth, diversification and job creation in Alaska, AIDEA spokesman Karsten Rodvik told Petroleum News in a July 11 email.
“We made our investment knowing that the project could be impacted by the price of crude oil,” Rodvik said. “That’s the nature of the industry. Despite the challenges that have come about as a result of the oil price collapse, we continue to believe there is a viable opportunity to help advance Mustang development. We are taking steps to restructure our investment to reflect current market conditions, and given these comprehensive efforts, we believe that Mustang should move forward.”
“The June 29 resolution that was approved by the AIDEA board is a positive step forward in getting the Mustang project back on track,” Armfield told Petroleum News. “BRPC is planning to conduct some field work on the project in the coming months with an ultimate objective to engage with other third party entities to fully fund the overall project, with an anticipation of first oil production from the facility in late Q4 2018.”
Bringing the project back on track can generate several hundred Alaska engineering, fabrication and construction jobs, he said. Brooks Range is anticipating using the current infrastructure associated with the project to establish a foundation to monetize the Mustang investment and allow for an opportunity for continued growth in the region, Armfield said.