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April 2006

Vol. 11, No. 15 Week of April 09, 2006

Dodds: Andex Nenana drilling on hold pending state of Alaska production tax

Tom Dodds, president of Andex Resources, told the House Finance Committee April 3 that Andex and its partners are on hold in planning for a Nenana basin exploration well pending resolution of the proposed petroleum profits tax.

Andex and its partners Usibelli Energy, Arctic Slope Regional Corp. and Doyon Ltd. completed a 2-D seismic survey west of the town of Nenana in the spring of 2005 and spent the summer interpreting that data.

Dodds told legislators that the partners wanted to try new reprocessing of the seismic data, which delayed drilling to the winter of 2006-07. Logistics work was planned to start in February, he said, but then the new PPT tax appeared.

He said Andex’ concern with the proposed PPT tax is that taxes will increase and you won’t have exploration companies coming to Alaska because of the risk.

Incentives with the tax increase will have to be real, Dodds told legislators, and they have to be long term, because everything Andex does is based on long-term economics. Without new investments there will be little or no exploration in the state, and little or no new reserves found, he said.

The company’s Alaska exploration license acreage is 300 miles from the nearest producing well, Dodds said, and there is no infrastructure: everything will have to be built, and the time from the first discovery to sale is estimated at seven to eight years.

Whether a first well could be drilled in 2006-07 is subject to how soon everything is settled on the PPT and the gas contract, he said. Much beyond the end of April, he said, and the possibility of drilling next winter will be lost.

Andex is looking at moving a rig out of Kenai or Canada or possibly from the North Slope, Dodds said, but noted that most North Slope rigs wouldn’t work because they don’t break down into something that Andex could move to where it would be needed.

—Kristen Nelson






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