Seismic permit approved for Andex in Nenana basin

Firm still looking for gas project partner; winter seismic program planned by PGS

Patricia Liles

Petroleum News Contributing Writer

Denver and Houston-based Andex Resources continues to look for a partner for its Nenana basin gas project, after its contractor secured a state permit needed to complete a $3 million winter seismic program at the Interior Alaska prospect.

Andex’s contractor, Anchorage-based PGS Onshore, received on Aug. 18 its state exploration permit to complete up to 215 line miles of two-dimensional seismic surveys within a roughly 415 square mile area in the Nenana basin.

The under-explored basin, believed to contain conventional gas, is southwest of Fairbanks and west of the small Tanana River community of Nenana.

The northernmost part of the project extends to the Minto Flats State Game Refuge, while the southern border extends south to Dune Lake, according to the exploration permit issued by the Alaska Division of Oil and Gas.

The center of the planned exploration area is about 10 miles west of Nenana, according to Larry Watt, PGS’s Alaska manager.

Work will begin in September, with a small crew spending four or five days in the area, completing a required archeological survey, Watt told Petroleum News in late August.

The actual seismic work remains on hold, he said, pending a final decision by Andex. “We’re still waiting on our client,” Watt said. “They’re still looking for a partner. They have not told us for sure to do it (the seismic work).”

An Andex spokesman confirmed the company was still working to secure a partner and declined to comment further on the project.

Approved exploration project

The actual seismic recording work will take about 60 days, and will involve a crew of 35 to 40 people, including camp and catering employees. PGS Onshore plans to set up a temporary winter camp for workers roughly 15 miles west of Nenana in the Minto Flats.

According to the state permit, 14-foot wide survey lines will be cleared of standing vegetation using mulchers, without disturbing the root system and vegetative mat. Recording cables and geophones will be laid out along one side of the seismic line and vibrators will travel the lines, stopping about every 200 feet and vibrating. After recording, cables will be removed and all trash, flagging and other debris is to be cleaned up.

Every five line miles, the mulched line will alternate from one side of the receiver cable to the other, to interrupt direct line of sight down the line. That distance will change to every three miles within the Minto Flats Refuge, according to the state permit.

By Dec. 1, PGS must submit final program maps that will locate the following: seismic lines, the camp, the route to the camp, proposed locations for seismic line blocks across existing trails, locations for crossing fish-bearing water bodies, locations for line jogs that cross water bodies and the locations of bear dens so that work will maintain a half-mile distance.

License area under-explored

Some Native lands owned by Doyon Ltd., Seth de Ya-Ah Corp., the Minto village corporation, and Toghottehle Corp., the Nenana village corporation, are also located within the license area.

Andex Resources announced during a public meeting in Nenana earlier this year plans to spend $3 million on the seismic program this winter. That’s in addition to the roughly $3 million cost to acquire and reprocess old seismic data taken in the 1960s and 1980s, Watt said.

Only two shallow exploration wells have been drilled in the study area, in the central and southern portion. Then, Unocal and ARCO were looking for oil, not gas, Watt said.

“Except for minor amounts of gas associated with coal beds, no hydrocarbon shows were observed in the wells,” the state said in its Final Best Interest Finding for the Nenana basin. “Reports of oil seeps in the basin are unconfirmed.”

That state report indicates as much as 16,000 feet or more of “non-marine Quaternary and Tertiary sediments lying above a Jurassic metamorphic basement.”

The prospective sedimentary section, consisting of sands, gravels, conglomerates, shales and coals, is believed to be equivalent in time to the productive Kenai Group in the Cook Inlet. “Structural, stratigraphic and combination traps are likely to occur throughout the basin,” the state report said.

Interior gas supply needed, market already exists

Patricia Liles

A 70-megawatt power line connected to the state’s major electric providers runs near the project area and the company can draw from an experienced oil industry labor pool.

Perhaps most important for the long term viability of the Nenana basin is an existing and growing natural gas market in Fairbanks, located roughly 60 miles from Andex’s license holdings in the basin.

Fairbanks Natural Gas, the only commercial source of natural gas in Interior Alaska, currently buys Cook Inlet gas and liquefies it at Point MacKenzie, trucking it north for use by its growing base of customers.

Specialized LNG tanker trucks haul gas on the 350-mile trip up the Parks Highway, making up to 24 trips per week during the peak demand in winter months.

The company’s operations include 92,000 gallons of storage at its south Fairbanks facilities, equal to about five days of peak customer consumption. Fairbanks Natural Gas also operates equipment used to revaporize the liquefied product, and to pump it through the distribution network of underground pipe.

“Fairbanks Natural Gas would benefit from any pipeline source as it would eliminate many of the added costs associated with the LNG,” said Dan Britton, president of Fairbanks Natural Gas.

Having a local supply of natural gas would allow the company to shift spending from its transportation, production and storage components, which make up about 40 percent of current customer costs, he said.

“A gas pipeline would take away any of our limits from the production and storage side,” Britton said. “We would be able to focus our financial and physical efforts on our distribution system alone.”

Despite its substantial gas-handling infrastructure costs, Fairbanks Natural Gas has grown rapidly since beginning in 1997 with a small network of customers in the southern industrial part of Fairbanks. The company now supplies gas to more than 600 customers, including some large players like Home Depot, Wal-Mart, Pike’s Landing, Hotel and Cabins and the Princess Fairbanks Hotel.

The company provides fuel for more than 5 percent of the Fairbanks market, based on volume. That will likely grow, as piping to serve new large commercial construction on the east side of Fairbanks was completed this summer, Britton said.

“Our current supply contract out of Cook Inlet is good until 2007,” he said. “We are looking at longer term supply strategies now.”