THE LINK: JANUARY 2024 38 Financing can be approved without Legislature input The Alaska Industrial Development and Export Authority, the state’s development finance corporation, is best known these days for its role in facilitating access to promising minerals projects. But the authority is also no stranger to helping small, struggling oil and gas developments. There’s now increasing concern for shortages of natural gas from Cook Inlet. Gas is needed for space heating and power generation in Southcentral Alaska. Some now think there may be a role for the state development authority in helping finance development of known gas deposits that are owned by small companies, but which have limited resources. AIDEA has confirmed that discussions are underway with HEX Cook Inlet LLC, an Alaska-based company that has a good gas prospect near its existing platform in the Kitchen Lights field. HEX recently paid off a previous $7.5 million loan from AIDEA to finance the development of Kitchen Lights. In fact, the loan was paid off eight months early with a final $260,180 payment made Oct. 25. Another small company, BlueCrest Energy, based in Fort Worth, Texas, has a substantial confirmed gas deposit overlying its offshore Cosmopolitan oil field near Anchor Point, off the Kenai Peninsula. BlueCrest has limited oil production now underway, but the gas deposit is at a shallower depth. The oil is deep enough to be drilled and produced from wells drilled from onshore, but the gas will require construction of offshore platforms and pipelines to shore. BlueCrest has so far been unable to line up financing for the gas development but there might be a role for AIDEA. Both HEX and BlueCrest were engaged in development at Kitchen Lights and Cosmopolitan in 2016 with the help of the state’s exploration and development investment tax credit. Both projects were undercut, however, when former Gov. Bill Walker abruptly cancelled the state tax credit program, leaving the companies without financing to complete their development work. At the time, Walker was struggling with an unexpected collapse in crude oil prices that sent state revenues plummeting. The governor had to cut as many expenditures as possible to preserve money for basic public services. In addition to AIDEA, state Department of Natural Resources officials are also now looking at ways to help small companies like BlueCrest and HEX as well as other gas producers in Cook Inlet. One idea is for the state royalty on leases to be waived or reduced. Gov. Mike Dunleavy will propose this idea to the Legislature, which must approve a statute change. In contrast, AIDEA’s long-term, low-cost financing, can be approved by AIDEA’s board and without the Legislature. AIDEA has also done this on the North Slope in helping development of the small Mustang oil field, which sits between the Kuparuk River and Alpine oil fields and has oil reserves estimated at 25 million barrels. Mustang is also adjacent to the existing Kuparuk pipeline, which will make access easier for its oil to be transported to TAPS’ Pump Station One at Prudhoe Bay. Like Cosmopolitan and Kitchen Lights, Mustang has faced financial problems created when former Gov. Walker cancelled state tax credit payments that helped underpin financing for field development. AIDEA had extended $72 million in equity investments in surface facilities for Mustang but eventually had to foreclose on the field and take over ownership. The field was recently sold to Finnex Operating LLC, a subsidiary of Thyssen Petroleum USA. Gordon Pospisil, president and CEO of Finnex, said he now plans a phased development at Mustang. Meanwhile, AIDEA isn’t the only state agency engaged in development finance. Its sister agency, the Alaska Energy Authority, helps utilities and communities finance infrastructure for power generation and transmission. — Tim Bradner AIDEA looks to help finance new Inlet gas Photo Courtesy BlueCrest Energy BlueCrest Energy rig on the Kenai Peninsula.
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