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AIDEA eying oil production facility The public corporation is studying whether to invest $45 million in a facility at the Mustang field; could serve numerous companies Eric Lidji For Petroleum News
The Alaska Industrial Development and Export Authority is considering whether to help finance a North Slope oil processing facility, the first project of its kind for the agency.
The board of the public corporation voted unanimously on Feb. 15 to spend up to $100,000 to perform due diligence and to structure a potential deal to help Brooks Range Petroleum Corp. finance a 15,000 barrel per day production facility at the Mustang field, a burgeoning oil development the company is pursuing in the Southern Miluveach unit.
Under the proposal, AIDEA would invest in the project by joining Mustang Production Facility LLC, a new joint venture that would build, own and operate the facility.
AIDEA would only pay $45 million of the estimated $190 million total cost of the project, earning a 10 percent rate of return on its investment over 10 years as well as a small working interest in the unit. AIDEA expects the Singapore-based Ezion Holdings Ltd. to contribute between $95 million and $125 million to the project and an as-yet-undetermined third party to contribute the remaining $20 million to $50 million.
Attracting additional capital Even though AIDEA would be the smallest investor, it believes its contribution is crucial for attracting the additional capital needed to bring the project into production in a timely manner. The Mustang project is believed to be too small to interest the major companies able to fund a project out of pocket, but too big for traditional financing, according to Jim Hemsath, deputy director for project development and asset management for AIDEA.
“AIDEA’s involvement brings access to capital and also provides the catalyst and security that helps pull together… a full financing plan for the project,” Hemsath said, saying that the $65 million AIDEA plans to invest in Mustang between the proposed production facility and its previous contribution to road and pad infrastructure, could generate some $400 million in outside capital required to bring Mustang into production.
Hemsath said that both an unnamed equity partner and a lending institution were “very clear” that their involvement in the project was predicated on AIDEA’s involvement.
The facility would primarily serve the Mustang field, but AIDEA hopes other leaseholders in the region such as Repsol E&P USA and Arctic Slope Regional Corp. would make use of the facility should they ultimately sanction projects in the vicinity.
AIDEA believes the project falls within its mission because it would create as many as 280 construction jobs and 25 full time operation jobs, and would generate some $1.2 billion in state revenues and $55 million in property taxes to the North Slope Borough.
With the $100,000 study, AIDEA would test the business case for its investment and the technical aspects of the project, and draw up a financing plan and associated agreements.
A major energy player With the proposed project, AIDEA continues to find its niche in the energy sector.
After the troublesome Healy Clean Coal Project showed AIDEA the potential downside of owning energy infrastructure outright, AIDEA decided instead to partially invest in energy projects where its ability to offer low-interest financing might lure private capital.
Within the past 18 months, AIDEA has pursued this strategy through four projects: its $24 million investment in the $68.5 million Endeavour jack-up rig in partnership with Kenai Offshore Ventures LLC; its $20 million investment in Mustang Road LLC to help Brooks Range Petroleum fund $25 million in preliminary infrastructure build-out associated with the Mustang field development, including a gravel road and gravel drill site; its proposed $45 million investment in the $190 million Mustang Production Facility; and its potential role in managing up to $275 million in bonds and loans included in a Gov. Sean Parnell’s proposed $355 million financial package to help a private company build a North Slope liquefied natural gas plant to serve Interior markets.
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