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Vol. 17, No. 46 Week of November 11, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

AIDEA considering road

Proposal would have state invest $20M in 4.5-mile Tarn to Mustang road

Eric Lidji

For Petroleum News

The Alaska Industrial Development and Export Authority is considering whether to invest $20 million in a small road and pad at a proposed North Slope oil development.

The public corporation of the state is currently conducting due diligence to determine whether it should build, own and operate a 4.5-mile access road connecting the existing Tarn road to the Mustang field, as well as a production pad at the development site.

After announcing a 40 million barrel discovery earlier this year, the small independent Brooks Range Petroleum Corp. is working to bring the Mustang field online by 2014.

Through its investment, AIDEA would fund more than 80 percent of the $24 million project to connect the field to the Alpine facilities and the North Slope infrastructure grid.

At a meeting at the end of October, the AIDEA board of directors agreed to spend up to $75,000 evaluating the project and crafting a business structure to own the road. Hoping to complete the project this winter, the board could vote on the project as soon as Dec. 6.

Brooks Range Petroleum is required to cover the $75,000 study cost.

15-year amortization

During this due diligence phase, AIDEA would determine the structure and ownership of the limited liability corporation that would own the road, prepare a finance plan and outline how AIDEA would recoup its investment. AIDEA is currently imagining a toll or fixed-fee structure allowing it to recoup its investment in 15 years at 8 percent interest.

The study would also detail the incentives and tax credits available to the project, and assess whether other parties near Mustang would be interested is using the road.

The Mustang field is in the Southern Miluveach unit, adjacent to the southwestern corner of the Kuparuk River unit. Other prospects in the region include the Brooks Range Petroleum-operated Kachemach and Tofkat units, and the Arctic Slope Regional Corp.-operated Placer unit. Repsol E&P USA Inc. also holds extensive leases in the region.

Through a mostly confidential feasibility study, AIDEA staff argued the project merited further consideration because it would help Brooks Range Petroleum develop $180 million standalone production facilities at Mustang and produce 15,000 barrels per day.

Through the development, AIDEA expects the road to directly create 30 jobs, leading to 250 jobs during production facility construction and 25 full-time operations positions.

By Brooks Range Petroleum developing the 25 million barrels of proven oil reserves at Mustang, AIDEA estimates the state would earn some $1.2 billion in taxes and royalties over the life of the field, in addition to increasing throughput on North Slope pipelines.

If approved, the Mustang road would be the first energy industry transportation infrastructure project undertaken by AIDEA. In 2011, AIDEA entered the drilling business with a $24 million investment in a jack-up drilling rig currently in Cook Inlet.



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