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August 2009

Vol. 14, No. 31 Week of August 02, 2009

Indecision hobbles Arctic natural gas

Canada issues new strategy to strengthen Arctic sovereignty claims, develop region’s resources; NEB lists Mackenzie project barriers

Gary Park

For Petroleum News

The Canadian government repeatedly makes the right noises about claiming sovereignty over a vast chunk of the Arctic and developing the region’s resource potential.

But its own energy regulator, the National Energy Board, has issued another warning that regulatory procrastination is eroding hopes for the Mackenzie Gas Project.

In its latest push, the government is opening a Web site to track its Arctic investments and policy initiatives, all part of its global campaign to show how important the Arctic is to Canada.

Separately, Environment Minister Jim Prentice, the cabinet minister overseeing the MGP, told Canwest News Service that an important milestone in the drawn-out review of the MGP is within sight.

“In our country, we’ve been working on this project for close to 40 years and we have never been as close as we are at this point (to going ahead before an overland gas pipeline is built from Alaska),” he said.

Prentice also said he hopes negotiations with the MGP proponents about a federal role in the project will be concluded this year.

But he conceded that work can’t be completed until the Joint Review Panel, responsible for making recommendations on environmental and socioeconomic issues, submits its final report.

Prentice said he has been putting pressure on that panel to submit its report by December.

The MGP is an “important project to Canada and completion of the Joint Review Panel process is a critical step in the whole procedure,” he said, again showing his frustration over the “unreasonable” amount of time the panel is taking.

Prentice said he has explored what legal options he has to speed up the panel’s deliberations, including dismissing the panel, and discovered he was very restricted.

Report unveils action

At a July 26 news conference, three members of the federal cabinet — Indian and Northern Affairs Minister Chuck Strahl, Foreign Affairs Minister Lawrence Cannon and Science and Technology Minister Gary Goodyear — unveiled a report entitled “Canada’s Northern Strategy: Our North, Our Heritage, Our Future,” which outlines “concrete action” being taken on several fronts, including social and economic development and environmental protection.

It rates Canada as an international leader for its efforts to chart a future for the Arctic region, especially in dealing with rapidly retreating sea ice and rising demand for offshore oil.

The document said international interest in the region has been gathering momentum because of the potential for resource development, opening new transportation routes and the impact of climate change.

It also downplays the prospect of international conflict over undersea territorial claims, insisting protocols under the United Nations Convention of the Law of the Sea will solve any disputes over Arctic boundaries.

Cannon stressed Canada’s intention to have “frank discussions” with other foreign leaders about its determination to affirm Canadian Arctic sovereignty.

Startup date delayed

But, in dragging years behind the original timetable for dealing with the Mackenzie Gas Project application, Canada has extended the earliest startup date for production of Mackenzie Delta gas to 2017, almost a decade later than initial hopes, according to the National Energy Board.

In a gas outlook report to 2020, the NEB said considerations for northern projects include competition from shale gas, extreme market volatility, the availability of labor, cost escalation, acquiring adequate financing and obtaining access to land.

That projection represents a further delay of about two years from the NEB’s own 2007 reference case, but it does not expect Alaska gas to start flowing across Canada to the Lower 48 until after 2020.

The report said gas resources north of the 60th parallel or offshore are designated as frontier supply and are estimated at 225 trillion cubic feet, or 53 percent of the base, but due to long lead times are expected to make only a minor contribution to total Canadian output by 2020. l






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