Oil patch insider: Finnex, Mustang Holding make deal to make a deal; A.O. No. 340
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Since the Alaska Industrial Development and Export Authority, or AIDEA, completed a Sept. 23, 2020, non-judicial foreclosure that granted 90.1% ownership of the Southern Miluveach unit and related loan collateral to Mustang Holding LLC, a wholly owned AIDEA subsidiary, MHLLC has been unit operator, keeping the unit’s Mustang project and its assets in a regulatory compliant cold shut-down status - and continue to provide for the protection of all surface equipment, wellbores, pipelines, roadways, well pads, and any and all related equipment and infrastructure.
The Southern Miluveach unit, or SMU, lies between the Kuparuk River and Colville River units and is adjacent to the Quokka unit on Alaska’s North Slope.
At one point MHLLC executed a non-binding term sheet with Finnex LLC to develop and manage the project. Finnex was to be led by Gordon Pospisil who had over 30 years’ experience working in the oil industry in the Rockies, Alaska, Canada, and Texas.
Anchorage-based Finnex had been formed on June 23, 2020. According to an Alaska Division of Corporations filing, at the time Thyssen Petroleum Alaska LLC held 85% of Finnex and Galactico LLC the remaining 15%. An affiliate of Thyssen was part of a joint venture put together by the original operator of the SMU, small independent Brooks Range Petroleum Corp.
Mustang was the first oil field on Alaska’s North Slope to have been taken from discovery to production by Brooks Range Petroleum Corp., or BRPC.
BRPC drilled the Mustang discovery well, North Tarn 1A, in January 2012. The field is thought to hold 21.2 million barrels of proven oil in place.
Mustang began producing oil in early November 2019, per the Alaska Oil and Gas Conservation Commission. The field produced 10,999 barrels of oil that month, averaging 478 barrels a day for the 23 days it was in production.
Due to BRPC’s financial difficulties the field has been offline ever since. Those financial difficulties were primarily with lender AIDEA’s foreclosure and the previous gubernatorial administration’s refusal to pay millions in approved oil and gas tax credits designed to offset exploration expenses.
But Finnex obviously has not lost interest.
A Sept. 30 document posted Oct. 4 on Alaska’s Division of Oil and Gas website contained the 10th plan of development for the 8,960-acre SMU. It was submitted by MHLLC on behalf of owners MHLLC, Nabors Drilling Technologies USA Inc. and AVCG LLC.
The Sept. 30 filing said that during the ninth plan of development MHLLC “was actively engaged with interested parties concerning the competitive sale process for the unit and related infrastructure.”
Those efforts led to an announcement at the August 2022 AIDEA Board meeting by AIDEA Executive Director Alan Weitzner, who said MHLLC had executed a non-binding term sheet with Finnex to develop and manage the Mustang project.
In the 10th plan of development, or POD, covering calendar year 2023, MHLLC and Finnex “will work expeditiously and prudently to agree upon and execute definitive documents related to the development and management” of the Mustang project and the SMU.
Long-range proposed development activities for the unit, MHLLC said, “pursuant to the expected transaction with Finnex,” is for MHLLC’s “operator successor” to provide to the division an amendment to the 10th POD. MHLLC expects that the amendment will include, but not be limited to, “plans for delineation of the underlying oil or gas reservoir(s), a detailed technical presentation supporting the activities and expected timeline to bring the reservoir(s) into production, and to maintain and enhance production once established.”
Obviously the deal with Finnex is expected to include an acquisition since the 10th POD also says, “MHLLC will also require its successor to apply to the Division for transfer of the MHLLC working interests in the SMU,” as well as provide notification regarding change of operatorship and assume any active, or have filed for all, required permits and establish any and all bonding requirements other than those that have previously been established by MHLLC.
Dunleavy establishes Office of Energy InnovationAlaska Gov. Mike Dunleavy recently signed Administrative Order No. 340 creating the Office of Energy Innovation to address the evolving energy needs of Alaska.
The A.O. was issued amid recent destabilizing global events that “have illustrated the importance of energy independence and with recognition of the positive economic impacts that come from domestic energy production,” a Sept. 30 press release from the governor’s office said.
The office was formed “with the purpose of developing policies that enable Alaska to capitalize on its vast energy potential to lower cost of energy and enhance the stability of energy delivered to Alaskans; to collaborate with public and private institutions to develop pragmatic, market-driven solutions; to assist all communities in accessing innovative technology and necessary funding to secure low cost reliable energy; and support efforts that enhance Alaska’s role in a national clean energy future through the development of a strong and responsible critical minerals mining program and the investment in emerging energy technologies,” the governor’s office said in its press release.
“Alaska is an energy giant in all its forms. We’ll continue to be an oil and gas giant, but we are all in for every form of energy - wind, solar, hydro, tidal, geothermal, micronuclear, and hydrogen. The Office of Energy Innovation will coordinate this pursuit of sustainable, dependable, and affordable energy,” Dunleavy said.
“From AEA’s electric vehicle charging station plan to the U.S. Air Force … releasing a RFP for the Eielson Air Force Base micro-reactor pilot program, Alaska has seen a number of exciting developments recently. This is an exciting time for energy and the Office of Energy Innovation will make sure we don’t miss a single opportunity to support Alaska’s energy independence,” Dunleavy said.
He announced the Office of Energy Innovation at Alaska Energy Authority, or AEA, in Anchorage, alongside DNR Acting Commissioner Akis Gialopsos, AEA Executive Director Curtis Thayer, John Burns, president and CEO of Golden Valley Electric Association, Tony Izzo, chief executive officer of Matanuska Electric Association, Gwen Holdmann, associate vice chancellor of University of Alaska, and Frank Richards, president of Alaska Gasline Development Corp.
“Alaskans need energy supplies that are stable and secure,” said Gialopsos. “A coordinated effort under Governor Dunleavy’s Office is a tremendous step forward that focuses agencies’ efforts on Alaska becoming a leader in both carbon capture, utilization, and storage, or CCUS, and building the critical minerals of this state and nation.”
“As the State’s energy office, we are committed to ensuring that all Alaskans have access to safe, reliable, affordable energy,” said Thayer. “This Administrative Order builds on and reaffirms the work that the State of Alaska has already undertaken with our partners here today, and will contribute to economic growth and job creation, as we accelerate our transition to a clean energy economy.”
“Alaska has tremendous capacity to produce clean and affordable hydrogen in the form of ammonia to meet the growing demand from Alaskans and world markets. The Alaska LNG project can deliver North Slope natural gas to re-start existing and jump start future ammonia production in Nikiski,” said Richards, noting the new Office of Energy Innovation will “foster vital collaboration between numerous Alaska stakeholders to craft a versatile and innovative energy future for Alaska and the nations around the world who look to us for energy abundance and security.”
“Safe, reliable, affordable and sustainable energy is critical to Alaska’s economic and social viability,” said Burns. “The Office of Energy Innovation will ensure focused coordination and collaboration amongst all stakeholders to leverage and maximize Alaska’s abundant natural resources and state and federal funding opportunities to positively transform Alaska’s energy future.”
“We stand at the crossroads of a pivotal moment for the future of energy in the State,” said Izzo. “MEA is united with the other interconnected Railbelt utilities in our commitment to work with the Governor, legislature and other stakeholders to be a catalyst for a secure, clean and diverse energy mix that can drive economic growth and a vibrant Alaska.”
“Microreactors and modular nuclear reactors are fast approaching market readiness, and with the planned project at Eielson AFB in 2027 Alaska is poised to be an early adopter of this emerging technology,” said Holdmann.
The A.O. takes effect immediately and will utilize existing personnel and resources within the Office of the Governor.
- KAY CASHMAN