Mackenzie faces delayed start-up to 2012

Northwest Territories Industry Minister Brendan Bell has reiterated that a regulatory slowdown is likely to stall the first gas deliveries from the Mackenzie Delta by one year to 2012 — assuming the Arctic pipeline actually proceeds.

In a conference call from Anchorage, Bell also said setbacks for the planned Alaska gas line compound the difficulties confronting the Mackenzie project.

“I think we should be compelled to get both these projects done in as quick a timeframe as we possibly can,” he said.

“We’d like to see Alaska happen … (and) we think there are a number of reasons for us to collaborate as jurisdictions to get both these projects built,” he said.

But an extended completion date until early next year by the Joint Review Panel, conducting hearings on the socio-economic and environmental impacts of a Mackenzie Valley pipeline, has effectively pushed the completion date into 2012, Bell said.

“It really amounts to a one-year delay,” he said, noting that the more time passes, the more the Mackenzie project has to deal with rising construction costs, compounded by cost-inflation in the Alberta oil sands sector.

Mackenzie operator Imperial Oil is currently immersed in revising its projected C$7.5 billion price tag, a process some observers believe will see the budget climb to C$10 billion or more.

Imperial spokesman Pius Rolheiser would only tell Petroleum News that the new numbers will, as promised, be released some time this fall.

He emphasized that it would be shortsighted for the Mackenzie partners to proceed with a project that won’t come on stream for another six years and is expected to have a 25-year lifespan without a better understanding of the economics.

Rolheiser told the Edmonton Journal that discussions with the Canadian government on Mackenzie support programs such as northern gas royalty deferrals and financial assistance for aboriginal partners in the pipeline are on hold until the cost review is finished.

He conceded that delays in the regulatory hearings, which are now scheduled to wrap up in April 2007 rather than December 2006, have a negative impact.

However, Bell said he hopes Imperial’s review will help expedite the construction schedule, although Imperial is sticking with its three-year construction schedule, which is difficult to shorten because of northern winters.

—Gary Park