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Vol. 19, No. 18 Week of May 04, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

AIDEA funding Mustang

Public corporation will pay up to $50 million of $225 million facility

Eric Lidji

For Petroleum News

In a first for the public corporation, the Alaska Industrial Development and Export Authority has agreed to partly finance a North Slope oil and gas processing facility.

On April 24, the AIDEA board voted to partner with CES Oil Services Pte. Ltd. to form Mustang Operations Center 1 LLC, which will finance a $200 million to $225 million processing facility at the Brooks Range Petroleum Corp.-operated Mustang field.

AIDEA will spend up to $50 million on the project.

The bulk of the project is a 15,000-barrel-per-day facility to process crude oil from the Mustang field at the Southern Miluveach unit on the central North Slope near Nuiqsut.

The project also includes a pipeline to connect the field to the existing Alpine Pipeline.

The new joint venture will own the facility, but unit operator Brooks Range Petroleum Corp. will build and operate it. The owners of Brooks Range Petroleum are currently in talks in sell the company, according to information AIDEA released as part of its vote.

With a successful closing in May, the partners could begin construction on the facilities as soon as the third quarter. The project is currently slated for an early 2016 startup.

CES Oil Services Pte. Ltd is a subsidiary of Charisma Energy Services, which is an affiliate company of Singapore-based Ezion Holdings Ltd. AIDEA previously partnered with Ezion to purchase the Endeavour jack-up rig currently stationed in Cook Inlet.

Two for two

The project is the second collaboration between AIDEA and Brooks Range Petroleum.

The public corporation previously invested $20 million in the construction of a road and pad at the Mustang field, which is the first development planned for Southern Miluveach.

The basic goal of both partnerships was to use AIDEA funding to leverage private-sector investment for viable projects of local importance, but the Mustang facilities venture also aims to provide a “stepping stone” to improve the economics of other fields in the region, including potential developments on the horizon from Repsol and ASRC Energy.

As such, the facility is being established in an “open use” arrangement and AIDEA said the partners might expand the facility in the future to accommodate other production.

AIDEA estimates that the project will generate 50 jobs during the design and planning phases, 250 construction jobs and 20 to 25 full time jobs once the facility is operational.

The terms of the AIDEA investment include a 10 percent annual dividend paid quarterly and a seven-year repurchasing plan. CES will provide $1 million in equity funding and will arrange a $175 million loan from the Mauritius-based Strategic Equipment Inc.

The deal also gives Mustang Operations Center 1 LLC, or MOC1, a 20 percent working interest in the Mustang field. The working interest stake would be adjusted annually. The working interest allows the joint venture to benefit from state tax credits for exploration.

Five-phase development

The project envisions a five-phase development plan over three to four years.

The first phase would include two horizontal production wells, one vertical gas injection well and four vertical water injection wells. The second and third phases would each include two horizontal production wells and four vertical water injection wells. The fourth phase would include two horizontal production wells and two vertical water injection wells. The fifth phase would include three horizontal productions wells and five vertical water injection wells, for a total of 11 production wells and 20 injection wells.

The production wells would have 11,000-foot to 22,000-foot vertical sections with 5,000-foot laterals. The wells would be placed roughly every 15-feet on the production pad.

The program is expected to cost $350 million.

New owner for BRPC

The deal comes amid sale negotiations.

The Kansas-based Alaska Venture Capital Group LLC formed Brooks Range Petroleum in 2004 to be its operating arm for North Slope exploration and development. Now, AVCG and Nabors subsidiary Ramshorn Investments Inc. jointly own Brooks Range Petroleum, but are in talks to sell the subsidiary to Thyssen Petroleum USA Corp.

Thyssen Petroleum USA is the American subsidiary of Thyssen Ltd., a privately owned company based in the British Virgin Islands, with offices in Monaco and Houston.

The chairman of the company, a Swiss national named Baron Lorne Thyssen-Bornemisza, “heads a family business with investments in the entertainment industry in California, agriculture in Pakistan and is a major shareholder in IHS, the critical information provider to the oil and gas industry,” according to a company website.

Thyssen Petroleum USA formed a subsidiary called TPNorthSlope LLC on March 14, 2014, according to the Division of Corporations, Banking and Professional Licensing.

In addition to buying the business entity Brooks Range Petroleum Corp., Thyssen would also buy a 90 percent working interest in the Southern Miluveach unit from the Alaska Venture Capital Group and Ramshorn, according to information provided by AIDEA.

The remaining 10 percent working interest is split between Brooks Range Development Corp., which holds nearly 9 percent, and Mustang Road LLC, which holds 1 percent.

Brooks Range Development Corp. is a wholly owned Alaska Venture Capital Group subsidiary, formed in 2010 to acquire the interests of a previous investor in the program.

Mustang Road LLC is a joint venture between the Alaska Industrial Development and Export Authority and the Alaska Venture Capital Group. The partners formed the company in 2013 to construct a road and pad to support operations at the Mustang field.

As of April 7, 2014, Alaska Venture Capital Group, Ramshorn and Brooks Range Development Corp. held nearly 105,000 acres of state leases, while Brooks Range Petroleum Corp. was not leasing any state acreage, according to a state database.

The sale of Brooks Range Petroleum Corp. and the 90 percent working interest in the Southern Miluveach unit are both pre-conditions for the financing, according to AIDEA.

Brooks Range Petroleum said it was unable to comment about the deal at this time.

After Brooks Range Petroleum discovered Mustang, the company told Petroleum News it was pursuing one of two financing strategies. Either it would find an investor that would fund initial costs until Mustang comes online, and later go public to raise additional working capital. Or it would find a producer willing to take a majority stake in the field.

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