$1bn Texas midstream project gets Japanese finance

The Petra Nova Project has got senior debt financing from lenders including Japan Bank for International Cooperation (JBIC) and Mizuho Bank.

A $1 billion midstream oil project in Texas has secured senior debt financing from Japanese commercial and export credit agency lenders, according to a statement.

The Petra Nova Project, a carbon capture/enhanced oil recovery project in Texas, has got senior debt financing from senior lenders including Japan Bank for International Cooperation (JBIC) and Mizuho Bank., backed by insurance provided by Nippon Export and Investment Insurance (NEXI), the statement said.

Milbank, Tweed, Hadley & McCloy is the legal adviser to the lenders.

The senior lenders’ financing was supplemented by a $167 million grant from the US Department of Energy as part of the Clean Coal Power Initiative. The initiative pairs government and industry funding in support of responsible and sustainable development of US energy resources.

The project is sponsored by NRG Energy and JX Nippon Oil & Gas Exploration Corporation, and will rely on carbon capture and sequestration (CCS) technology provided by Mitsubishi Heavy Industries.

Located about 27 miles south-west of Houston in Fort Bend County, Texas, the Petra Nova Carbon Capture Project will capture approximately 1.6 million tons of CO2 annually generated by the coal-fired W. A. Parish Power Plant, the state’s largest electricity provider and one of the biggest in the country.

The carbon dioxide extracted from the Parish generating station will then be processed and transported via a newly constructed 82-mile pipeline to the West Ranch oil field in neighboring Jackson County, Texas, where it will be used for enhanced oil operations to recover up to 60 million barrels of previously unrecoverable oil, according to the statement.

The West Ranch oil field is owned through a 50-50 joint venture between Petra Nova and Hilcorp Energy. In addition to the CCS, EOR and pipeline facilities, the project also involves the construction of a 78MW power plant on the Parish site to provide auxiliary power for CCS operations.

“We’re excited to be helping facilitate financing for a sustainable energy project of such unprecedented size and sophistication. By combining CCS and EOR operations, the project demonstrates a commercially viable method of adding large-scale carbon capture facilities to existing power plants while providing a solid model for creating the additional revenue streams necessary to make the future implementation of carbon capture technologies economic, Milbank’s Tokyo-based global project finance partner, Alec Borisoff, said.