Mackenzie pipeline timing 'uncertain'
Guy Quenneville
Northern News Services
Published Monday, June 29, 2009
SOMBA K'E/YELLOWKNIFE - When the Mackenzie Gas Project will begin producing natural gas - originally thought to be 2014 - is now "uncertain" due to regulatory delays, said Pius Rolheiser, spokesperson for Imperial Oil, adding that the project timeline will be revisited after the release of the Joint Review Panel's report.
"All I can say with certainty is that the timing of our project remains uncertain because of a number of factors including the regulatory process," said Rolheiser.
In March 2007, Imperial and the remaining stakeholders - ConocoPhillips, Shell Canada, ExxonMobil and the Aboriginal Pipeline Group, the latter of whom has received $500 million in funding from TransCanada Corporation - set an initial timeline in which the earliest the pipeline would come online was 2014, plus a revised project cost of $16.2 billion.
"That was our official cost and schedule estimate then; that was two years ago," said Rolheiser.
Asked if the production start could be later than 2014 under a new timeline that takes into account the delayed JRP report, Rolheiser replied, "Any specific answer I could provide on that would be speculative at best."
The timing of the Mackenzie pipeline is a key concern to the GNWT, which has cast the project in increasingly urgent terms in recent months.
Last week, in the wake of news that the United States will offer $30 billion in loan guarantees to proponents of the $26-billion Alaska Pipeline Project, Minister of Industry, Tourism and Investment Bob McLeod visited Washington, D.C. to meet U.S. congressmen, senators, energy officials and oil and gas company representatives to make sure the demand for the MGP is still ripe within the U.S., given the recent progress made by the Alaska project.
"There's been no indication that it's a lower priority," said McLeod of MGP, though adding that some expect the U.S. loan guarantees for the Alaska pipeline will exceed $40 billion.
Support for the MGP in the U.S. - which McLeod said is the primary market for Arctic natural gas - will remain strong as the U.S. Congress moves to adopt low-carbon fuel initiatives that will lead to increased demand for natural gas, he added.
"What everybody's telling us is that the United States' demand for natural gas is such that both pipelines will be needed - the Mackenzie and the Alaska," he said.
The MGP must come first, continued McLeod.
"We've always taken the position that the Mackenzie project has to go first for a number of reasons. One is that the size of the natural gas reserves. If Mackenzie natural gas goes first, it will fit very well into the existing capacity once we get it to market.
"If the Alaska gas goes first, the reserves of Alaskan natural gas are so huge that it would glut the market. It would drive natural gas prices down and it would probably result in delaying the Mackenzie Gas Project for a long time. There would be some question as to whether the Mackenzie gas would be developed (at all)."
McLeod said there are 104 trillion cubic feet of natural gas in Canada's Arctic while the U.S. Geological Survey estimates Alaska's North Slope, the source of the Alaska Pipeline Project, contains an estimated 250 trillion cubic feet of economically recoverable gas.
McLeod hoped his stateside visit would prompt the Government of Canada to announce more financial support for the MGP in order to "level the playing field" against the Alaska pipeline.
To date, the federal government has promised the stakeholders money for some infrastructure costs, as well as to cover expenses related to the regulatory process, though how much is not known.
"We don't want to see a situation where the Alaska pipeline project goes ahead because of loan guarantees that are being provided (by the US government) and the Mackenzie pipeline flounders because there isn't a similar level of assistance (from Canada) that will allow it to go forward," said McLeod.
He added the GNWT is not necessarily asking for loan guarantees but that "we want to see the (Canadian) government take whatever action it takes to make sure the Mackenzie pipeline goes forward."
On Wednesday, McLeod also met with officials from the U.S. Federal Energy Regulatory Commission (FERC), the American equivalent of Canada's National Energy Board (NEB). The NEB will ultimately review the JRP's report, set for a December release date, and issue the final green light for the MGP.
Based on the JRP delays, full regulatory approval for the MGP is likely to come in late 2010, said O.D. Hansen, spokesperson for the Aboriginal Pipeline Group.
Both the GNWT and Minister of the Environment Jim Prentice maintain the MGP is still far ahead of the Alaska pipeline.
In April, TransCanada, the leading proponent of the Alaska Pipeline Project and mover of 20 per cent of Canada's natural gas, completed its pre-filing with FERC.
TransCanada is currently on track to file its main application - which will include the project's technical specs, an environmental impact study and a review of the commercial terms for potential customers - in October 2012, said Tony Palmer, vice president of Alaska development for TransCanada.
"We expect that that will take less than two years, so we hope to have that approval by mid-2014... Then we would proceed to advance the project ... and start physical construction in 2016.
"We' be in service nine years from now on Sept. 1 of 2018. That's the success case, of course."
BP PLC and ConocoPhillips are proposing a competing Alaskan pipeline of their own, called Denali, which, unlike the Alaska Pipeline Project, has not been endorsed by the Alaska government.
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