Providing coverage of Alaska and northern Canada's oil and gas industry
January 2008

Vol. 13, No. 4 Week of January 27, 2008

Mac gets winter wake-up

Imperial scales back Mackenzie gas pipeline staff, links changes to regulatory pace

Gary Park

For Petroleum News

It’s dark, cold and quiet in Canada’s North at this time of year, but there’s also a buzz that has kept interest alive in the Mackenzie Gas Project.

Lead partner Imperial Oil has scaled down or redeployed MGP staff and contract workers in the Northwest Territories and its Calgary head office; startup explorer MGM Energy has completed the first of three winter wells; a Husky Energy-operated program will see two wildcat wells drilled in the Central Mackenzie Valley; and the National Energy Board has set mid-2009 to issue its final regulatory decisions on the MGP.

Imperial caused a stir trimming five of its 10 project employees in Inuvik, Norman Wells and Fort Simpson offices that were serving as a conduit for information to the community, but Imperial spokesman Pius Rolheiser emphasized the offices have not been closed.

He said more than 100 employees in the Calgary office — some part-time and some full-time — have been scaled back to about 50.

Rolheiser told Petroleum News the decisions were related more to the pace of the regulatory process than the completion of work.

The Calgary staff have been assigned to other major work, such as Imperial’s Kearl oil sands project.

Imperial: commitment not diminished

But Rolheiser was emphatic the changes do not signal a diminished commitment by Imperial to the MGP, even though a drawn-out regulatory process has pushed the possible startup date to 2014 from 2010.

He said that rather than a lessening of commitment, the staff moves reflect the fact that work is now concentrated on a smaller number of areas.

Rolheiser said Imperial is “working diligently to find a path forward,” including efforts to reach benefits and access agreements with aboriginal communities along the Mackenzie Valley natural gas pipeline route.

It is also engaged in an “on-going dialogue” with the Canadian government on a fiscal framework, with Industry Minister Jim Prentice — the cabinet point-man on the MGP — promising to move as “expeditiously as possible” towards a decision.

It is almost a year since Imperial and its corporate partners, ConocoPhillips, ExxonMobil Canada and Royal Dutch Shell, halted the next phase of engineering and executive work until a fiscal deal was reached with the government.

At the time, Rolheiser said it would be reasonable to expect that over time staff numbers would go down.

But any scaling back of MGP staff fuels speculation that the latest proposal submitted to Prentice contains a proposed restructuring that could see an expanded ownership role in the Mackenzie natural gas pipeline for TransCanada and the Aboriginal Pipeline Group, although the MGP partners and TransCanada are keeping a tight lid on the latest plan.

Rolheiser has refused to comment on any details of the current round of discussions or the plan placed before Prentice.

Report expected in mid-year

Meanwhile, the Joint Review Panel assigned to deal with environmental and socio-economic issues has indicated its report could be made public about mid-2008.

The National Energy Board is then expected to take another year to obtain comments on its proposed conditions and the panel’s recommendations before releasing its own decisions.

Randy Ottenbreit, who heads up Imperial’s MGP team, told the panel in its final hearings that given the proposed environmental measures, it is not likely the MGP or its ancillary facilities will result in “any significant adverse effects” to the land or Native cultures.

The proponents have rejected criticism from groups such as the Canadian Arctic Resources Committee and Alternatives North, who have urged the JRP to delay its decision, or reject the project because Imperial has “not provided enough information for the panel to make an informed decision. …”

The MGP has countered that authorities such as land and water boards, along with the federal and Northwest Territories governments, will play an important role in implementing mitigation measures.

MGM Energy drilling

Although the MGP corporate partners have shelved any exploration plans, MGM Energy is plugging ahead to meet its farm-in agreement with Chevron Canada and BP Canada Energy.

It reported Jan. 13 that the first of three winter wells in the western region of the Mackenzie Delta has reached total depth, originally set at about 6,500 feet. The well was designed to test the Taglu and Aklak formations.

MGM said the Atik P-19 well on Exploration License 427B, encountered a number of zones of interest and, as a result, has been cased.

Testing of the well to confirm the presence of gas in commercial quantities will be coordinated with the testing of the second exploration well, Aput D-42 (formerly Shavelig D-42), which is currently expected to spud on or before Feb. 4 and is also targeting a depth of 6,500 feet.

The company said further information on Atik P-19 will likely be released by mid-March once test results have been evaluated.

A third well, called Langley E-07, will be drilled to about 4,600 feet on Exploration License 394 and is expected to spud in late February or early March. It is designed to test multiple stacked zones in the upper Taglu formation.

The total cost of the three wells is estimated at C$60 million. In addition, three seismic programs costing about C$34 million are scheduled for the winter.

Husky, according to junior partner International Frontier Resources, will drill two wildcats on Exploration License 423 this winter.

The Dahadinni B-20 will evaluate Devonian and Silurian prospects in an undrilled structure twice the size of the feature on which the Summit Creek B-44 well tested at 20 million cubic feet per day of gas and 6,300 barrels per day of condensate. The Keele River L-52 well will evaluate a Cretaceous oil prospect at 2,700 feet.

Husky is currently building two ice bridges across the Mackenzie and Keele rivers and a 45-mile ice road into the exploration area.

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