AIDEA considers funding North Slope oil processing facility

Petroleum NewsFebruary 22, 2013 

— 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-a-day production facility at the Mustang field, a burgeoning oil development by the company.

Under the proposal, AIDEA would invest in the project by joining Mustang Production Facility, a new joint venture that would build, own and operate the facility.

AIDEA would only pay $45 million of the estimated $190 million 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.

Even though AIDEA would be the smallest investor, it says 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, which could fund such 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.

He added 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 to bring Mustang into production.

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