August 17, 2001 --- Vol. 7, No. 101August 2001

Netricity in negotiations with North Slope majors, says Andex exec

The company that wants to power a $1 billion North Slope data center is talking to North Slope producers about buying gas and hopes to have a deal in place by October. Jim Dodson, executive vice president with Andex Resources LLC of Houston, told PNA that Netricity LLC is “now in negotiations with a couple of the majors for our gas purchase agreement” and hopes to have a deal in place by October. Andex is a 25 percent partner in Netricity.

“We’re getting there,” he said, refusing to release more details “at this time.”

In May, the state told PNA that Netricity, an Alaska limited liability company, had asked to purchase 8.5 million to 120 million cubic feet of state royalty natural gas at a price of 36 cents per thousand cubic feet to generate power for a North Slope data center that would generate reliable electricity and 300 year-round jobs.

Kevin Banks, a petroleum market analyst with the state Division of Oil and Gas, said the price was too low and the quantity of gas exceeded the state’s daily royalty share. Fulfilling a contract with Netricity would have required the state to negotiate with producers to take a portion of its gas early, Banks said in May.

But Banks and other state officials were intrigued by Netricity’s concept.

The proposed facility, commonly known as a server farm, would provide web-hosting services and be connected to clients and users by the fiber optic system that runs the length of the trans-Alaska crude pipeline.

The North Slope is one of the few places in the United State with stranded gas. The power reliability in a jurisdiction that wouldn’t censor web content lent considerable merit to the project, division director Mark Myers told PNA in May.

Netricity’s other partner is Fidelity Exploration and Production Co., a subsidiary of MDU Resources Group, the parent company of Knife River Corp. which owns Alaska

Basic Industries and Alaska Sand and Gravel.

Andex close to deal with Doyon on Nenana basin; gas would go to Fairbanks, maybe Anchorage

Jim Dodson, executive vice president of Andex Resources LLC of Houston, told PNA that his firm is “very close to a deal with Doyon” to explore and develop the oil and gas resources of approximately 38,000 acres in the Nenana sedimentary basin in Interior Alaska.

Andex is also working with the state for an exploration license in the basin. (See related news item in this bulletin.) Dodson said Doyon Ltd. was instrumental in getting Andex interested in what geologists view as a gas-prone area.

“The Andex license application is for several hundred thousand acres in the basin. Our land is in a fairly strategic location in the deepest part of the basin,” Doyon Vice President of Lands and Natural Resources Jim Mery told PNA.

The Nenana basin, which Doyon Ltd. documents said could hold reserves “on the order of 250 million barrels of recoverable oil and 250 Bcf to 1 Tcf of recoverable gas,” was explored by ARCO Alaska in the early 1980s. ARCO drilled a well in the basin in 1984 but dropped its plans for further exploration when oil prices collapsed, Mery said.

It has enough gas, Dodson believes, to meet market demands for Fairbanks and possibly Anchorage: “We see a home heating market in Fairbanks and an electric generation market. We also see a market for supplanting diesel and other fuels to Interior mines. It’s a 30 million to 50 million cubic feet a day market (for natural gas) in the Interior. …

“If we found a significant gas discovery up there we could seriously look at supplying Anchorage,” Dodson added.

“By Alaska standards the Nenana basin is not that far from Anchorage. … We’re south of the Brooks Range and there are two rights of way that could be used for a pipeline between the basin and Anchorage – the highway and the railroad.”

Andex’s work commitment is confidential, Dodson said. “There won’t be any seismic or geophysical work this winter. We expect to shoot our first seismic in the winter of 2002/2003.”

State begins best interest finding for Nenana basin, expects to issue Andex exploration license next year

The state Division of Oil and Gas received no competing proposals for all or part of the 499,200 acre Nenana basin exploration license requested by Andex Resources LLC of Houston, Jim Hansen, the division’s lease sales manager, told PNA.

The state is working on a preliminary best interest finding for the Nenana basin study area, which Hansen said is the next step in the exploration license process.

“We’ll probably be done with the preliminary finding in February; then we’ll go out for public comment again before we prepare our final finding,” Hansen said. “It will be about a year before we can issue the license.”

Andex requested a 10-year exploration license in its application, the maximum time allowed under the law. It also included a work commitment, but those terms are confidential at this time, Hansen said.

When the division issues the license, it will include the terms it wants for the license. Andex can refuse or accept the license at that time, Hansen said.

Andex Executive Vice President Jim Dodson hopes to have a license no later than July. “We need it by July in order to grab a seismic crew for the next winter,” he told PNA.

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