AIDEA moves ahead on Mustang facility

AIDEA, CES Oil Services sign deal to invest up to $225 million in an independent open access facility on the North Slope

Eric Lidji

For Petroleum News

The Alaska Industrial Development and Export Authority and CES Oil Services Pte. Ltd. have completed a deal to finance an oil and gas processing facility at the Mustang field.

The partners will own the $200 million to $225 million North Slope facility through a joint venture called Mustang Operations Center #1 LLC. Southern Miluveach unit operator Brooks Range Petroleum Corp. will build and operate the processing center.

The facility will handle 15,000 barrels per day of oil for shipment and produce 7.5 million cubic feet per day of natural gas for field operations, including reinjection. It will also include a 10-megawatt power plant as well as operations camp and living quarters.

The construction costs include an interconnection to the nearby Alpine oil pipeline, which connects to the trans-Alaska oil pipeline through the Kuparuk oil pipeline.

With the deal completed and the first tranche of funds delivered, Brooks Range Petroleum now believes is can bring the Mustang field into production by early 2016.

The deal starts a new era for AIDEA.

The public corporation has been consciously pursuing oil and gas investments in recent years, including a stake the Endeavour jack-up rig. But the current venture represents an attempt to create a model for helping smaller exploration companies become producers.

AIDEA previously invested $20 million for the construction of a gravel road and drilling pad at Mustang. Those were completed last year. Through the current project, AIDEA will invest up to $50 million in the processing facility. Together, the $70 million investment in the Mustang Development Program is expected to leverage more than $500 million in private investment, according to AIDEA estimates. “Our partnership with Brooks Range and CES is a great example of bringing a complex project to fruition,” AIDEA Project Development and Asset Management Director Jim Hemsath said in a statement. “This is a model for future partnerships with Alaska’s independent producers.”

By investing in the facility, AIDEA was able to dictate some terms, including open access.

“The Mustang facility will enable companies operating on the North Slope to economically develop additional fields in a highly prospective area of the North Slope that to date has remained relatively underexplored,” Brooks Range Petroleum President Bart Armfield said in a statement, referring to lands west of the Kuparuk River unit.

Armfield said the Mustang development wouldn’t have been possible with AIDEA and CES. But he also credited Senate Bill 21, the recent revision to the state tax code.

AIDEA also saw SB 21 at play in the deal. “This project is a reflection of the confidence SB 21 has instilled in the private sector,” AIDEA Board Chairman Dana Pruhs said in a statement. “The Mustang Program has already created more than 100 exploration and construction jobs, with more than 500 direct and indirect jobs still to come with the design/engineering, permitting, construction and operation of this new facility.”

The chief proponent of the law, Gov. Sean Parnell, also saw the connection between the deal and new tax code, saying, in a statement, “Alaskans can be proud that our diligence and hard-worn efforts have successfully attracted new companies who are excited about joining with us in making Alaska one of the strongest economies in our nation.”