The regulatory formalities are over for the Mackenzie Gas Project, shifting attention to a more crucial verdict within the next three years by the corporate partners on whether shipping natural gas from the Arctic is a viable economic proposition.
On March 10, Canada’s National Energy Board issued a certificate of public convenience and necessity after receiving a green light from the federal cabinet, ending a process that started with regulatory filings in October 2004.
Now a decision on whether to start construction by a deadline of Dec. 31, 2013, and possible commence deliveries of 1.2 billion cubic feet per day in 2018 at the earliest, is up to the proponents — Imperial Oil, the Aboriginal Pipeline Group, ConocoPhillips Canada, Shell Canada and ExxonMobil Canada.
Earlier this week, Joe Marushack, Canadian president for ConocoPhillips, said the MGP is a “pretty tough project” given where gas prices stand at about $4 per thousand cubic feet.
Canadian Natural Resources, Canada’s second largest gas producer, is forecasting it could take another seven years before prices rebound, given the prospects of prolific output from shale gas fields.
But TransCanada, the leading contender to build and operate a Mackenzie pipeline, has suggested Arctic gas will eventually be needed to offset declines in output from Western Canada’s conventional resources.
Imperial Oil has welcomed the conclusion of the formal regulatory process, but notes that it now needs to obtain about 6,300 permits and authorizations, along with weighing a decision on corporate sanctioning.
In addition, the consortium has yet to negotiate a fiscal framework with the Canadian government to “provide an appropriate balance of risk and benefit” for both sides.
Northwest Territories Industry Minister Bob McLeod told the territorial legislature that the regulatory approvals are a “great day” for the NWT, which views the MGP has crucial to opening a new oil and gas basin in Canada’s North and advancing other resource development.
Steven Paget, an analyst with FirstEnergy Capital, said the outlook for the North American gas market is more crucial than the regulatory formalities.
He said shale gas projects, which are much closer to existing infrastructure and major population centers than the MGP, are likely to proceed first.
Alberta Energy Minister Ron Liepert said the current price of gas does not justify either the Mackenzie or Alaska pipelines.
“If the investment is made it would be good for Alberta, but there are challenges to overcome and they are economic rather than environmental or land concern issues,” he said.
Fred Carmichael, APG chairman, told CBC News said it’s now time for the Canadian government to follow the U.S. example by “stepping up to the plate … and providing a loan guarantee that will make this project happen.”
Two years ago, then-federal Environment Minister Jim Prentice said a financial package had been offered to the MGP partners, but a decision was put on hold pending completion of the regulatory process.
See story in March 20 issue, available online by 11 a.m. Friday, March 18, at www.PetroleumNews.com