The Trump administration closed a $480 million loan to the private, Texas-based Arena Energy to help boost oil and natural gas production in the Gulf of Mexico, the Department of Energy said on Tuesday.
It was the energy department's first closed loan supporting domestic oil and natural gas production, it said. The department's loan office was established in 2005, under former President George W. Bush, a Republican, to aid companies developing emerging forms of energy that had trouble getting loans.
The project will modernise 22 offshore platforms off the coast of Louisiana, the department said. At peak production, the project is expected to add up to 38,600 barrels of oil per day and up to 77 million cubic feet of natural gas per day to US energy production. By comparison, the US produces about 14 million barrels per day of crude.
Speaking at a press briefing in New Orleans on Tuesday, US Energy Secretary Chris Wright defended the decision to lend taxpayer money to a private company at a time when oil companies have been posting record profits because of the ongoing conflict in the Middle East that has spiked prices worldwide.
"Because they are in the shallow waters of the Gulf of Mexico...there's not capital of this nature for the shelf...it's virtually been abandoned," Wright said.
The administration of President Donald Trump has made it clear it is willing to loan to long-established fossil fuel companies in order to boost US production of oil and gas.
Wright characterised the loan as low risk and said the US Government would be repaid an additional $1.6 billion over ten years in royalties.
"By providing financing for projects like Project Elkhorn, the Energy Department is expanding domestic production and strengthening our energy security to power American prosperity for decades to come," Wright said in an earlier statement on Tuesday.
(Reporting by Curtis Williams in New Orleans, Anjana Anil in Bengaluru, writing by Timothy Gardner, editing by Deepa Babington and Nathan Crooks)