AOGCC fines Mustang Holding for a drilling permit infringement

Alan Bailey

for Petroleum News

In an Aug. 29 order the Alaska Oil and Gas Conservation Commission announced that is fining Mustang Holding LLC $50,000 for infringing the terms of its permit for the drilling of well M-03A in the Southern Miluveach unit on the North Slope. AOGCC says that, under the terms of the permit, a gamma ray sonde unit was required at the drill bit to ensure that the drilling did not enter the Kuparuk sand -- there are safety concerns relating to any penetration of the sand. However, the required unit had not been fitted as required during the drilling.

Different rock formations tend to have different radioactive emissions -- a gamma ray sonde unit can detect the emissions from the subsurface rocks and hence identify which rock formations a well is penetrating.

In response to an initial notification of the proposed fine a Mustang Holding drilling engineer told AOGCC that the drilling team had fitted the gamma ray sensor 75 feet behind the drilling bit, rather than at the bit. Because the drillers were not using a rotary steerable system for directional drilling, it was possible to use an alternative technique to avoid penetrating the Kuparuk sand, the engineer wrote.

However, AOGCC responded that any deviation from the permitted drilling plan requires commission approval -- hence the fine that the commission has imposed.

The Mustang oil field

The Mustang field was originally developed by Brooks Range Petroleum Corp. but only went into production for one month, producing 10,999 barrels of oil in October 2019. That original development included the construction of a 17-acre gravel production pad, located off a 5-mile spur road from the Kuparuk River unit's DS 2M Pad. A pipeline was constructed that can deliver crude oil into the Alpine Transportation Co. common-carrier pipeline just southeast of the Mustang pad.

Following financial difficulties BRPC defaulted on a loan from the Alaska Industrial Development and Export Authority and was unable to continue field development or field production. Mustang Holding LLC, a wholly owned AIDEA subsidiary, was subsequently formed to become field operator, on behalf of working interest owners Mustang Holding LLC (90.1%), Nabors Drilling Technologies USA Inc. and AVCG LLC. AIDEA proceeded to try to divest its financial interest in Mustang Holding, resulting from the defaulted loan to BRPC.

Sale to Finnex

In January 2024 Mustang Holding, by then owned by Finnex, filed an oil spill prevention and contingency plan with the Alaska Department of Environmental Conservation, envisaging the possibility of up to 38 wells in the Southern Miluveach unit. Subsequently, in a May 15 unit plan of operations amendment application, Mustang Holding said it would complete the Mustang-03 and M-01B wells, as well as re-entering the existing North Tarn-1A and M-02 wells. The drilling was expected to begin on July 1 and be completed by Sept. 11.

Mustang Holding has indicated that it plans to proceed with the installation of an Early Production Facility, or EPF, the re-installation of equipment required for field production, and the reconnection of the Mustang pipeline.

--ALAN BAILEY