Billion-dollar North Slope data center nears gas purchase deal

Netricity progresses in talks with North Slope producers, agreement by October a possibility

Steve Sutherlin

PNA Managing Editor

Netricity LLC, the company that wants to power a $1 billion North Slope data center with North Slope natural gas, may have a deal soon to buy its gas from producers, a company spokesman told PNA recently.

“We’re now in negotiations with a couple of the majors for our gas purchase agreement; we hope to have everything resolved by October,” Jim Dodson, executive vice president of Andex Resources LLC said Aug. 16, adding, “We’re getting there.”

Andex is a 25 percent partner in Netricity. Billionaire financier George Soros is one of Andex’s principal shareholders.

The Netricity facility would use a maximum of 120 million cubic feet of natural gas per day with a value of $1 billion to $2 billion over a 25 years period, Mark Myers, director of the Division of Oil and Gas told PNA in May.

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.

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.

Netricity subsequently entered gas purchase talks with North Slope producers. The state has had no discussions with Netricity regarding the sale of gas “in the past six weeks,” William Nebesky, a petroleum economist with the state Division of Oil and Gas told PNA Aug. 22.

Cold, lonely location works well

Facilities elsewhere in the United States are on power grids subject to fluctuation or rolling outages, but at the Netricity facility the power supply would be dedicated for one purpose, Caskey said.

The North Slope is one of the few places in the United States with stranded gas. The power reliability in a jurisdiction that wouldn’t censor web content lends considerable merit to the project, Myers said.

The facility, commonly known as a server farm, would house a half million web-hosting servers in a 1 million-square-foot building, connected to clients and users by the fiber optic system that runs the length of the trans-Alaska pipeline. It would also include construction of a 400 megawatt, gas-fueled electric plant to power the center, and an additional fiber optic line for back up.

“We project photons rather than molecules,” Caskey said.

When completed the center would provide an estimated 300 year-round jobs located in the North Slope borough, Caskey said. In addition, modular buildings to house the data center and power plant would be constructed in Anchorage or Nikiski.

Hundreds of similar server farms currently exist in and around major metropolitan areas throughout the country, and the need for new data centers is exploding. Yankee Group, an Internet industry research firm, estimates the data center business generated $9 billion in revenue last year and projects that will grow to more than $47 billion by 2003.

The centers are enormous consumers of electricity, and utility companies in many states are worried about the increasing demand on power systems that are already at or nearing their capacity. Much of the energy consumed by data centers is needed to cool the buildings to keep the equipment from overheating, making the frigid North Slope even more attractive for the purpose.

“Look at the pipeline. Alaska has one shot at revenues, but our project provides jobs, a tax base, and business in an area where there isn’t business,” Caskey said.

Company officials hope to have the data center up and running by 2003.

Netricity partner Fidelity Exploration and Production Co. is a subsidiary of MDU Resources Group, the parent company of Knife River Corp. which owns Alaska Basic Industries and Alaska Sand and Gravel.