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

Vol. 13, No. 21 Week of May 25, 2008

Mac delay baffles Imperial

Company uncertain how long it will have to wait for JRP socio-economic report

Gary Park

For Petroleum News

Unexpected and unwelcome — that’s the basic response from Imperial Oil to word of another delay in the Mackenzie Gas Project.

Bogged down in thousands of pages of evidence, the Joint Review Panel, charged with reporting to Canada’s National Energy Board on the socio-economic aspects of the MGP, needs perhaps another year to wrap up its work.

That could push the JRP recommendations well into 2009, instead of mid-2008, stalling the NEB’s deliberations to an uncertain date.

The bottom line, assuming the MGP gets the go-ahead on all fronts, points to a 2015 startup of production at the earliest.

When the MGP conducted its feasibility study in 2000 and 2001, its timetable involved another three to four years for project definition, including the submission of regulatory applications and another three to four years of well drilling, the purchase of goods and services and the construction of pipelines and facilities.

If that rosy schedule had remained on track, operations would have started in the 2007-09 period, but it was soon adjusted, with the most recent launch date set at 2014.

No formal communications on delay

What plainly troubles Imperial is that it had no formal communications from the JRP and no explanation for the latest delay.

Imperial spokesman Pius Rolheiser said the only comments reaching the lead partner “came via communications from the Northern Gas Project Secretariat (a federal agency created to help with the environmental assessment and regulatory review).”

He said that although the JRP has issued no formal updated guidance “it’s our understanding that we face a delay until sometime in 2009. When we don’t know.”

Based on what the NEB and JRP told Imperial in mid-2007, the company had expected final recommendations by mid-2008, Rolheiser said.

“Clearly this is not a positive development from our perspective and, while we recognize the significance of the task the JRP is carrying out, we don’t understand the reasons for the delay,” he said.

Rolheiser was unable to say how many more delays could be absorbed before there was a “material impact on the viability of the project.

“A further delay is not positive. … It will obviously have a negative impact on the project schedule and almost certainly place further upward pressure on costs.”

The most recent budget put the cost at C$16.2 billion and there are no plans to release an updated version until if and when regulatory approval is obtained and corporate decisions are made, Rolheiser said.

Otherwise, he said Imperial remains committed to the MGP and is “working diligently” on commercial and fiscal discussions with the Canadian government and on benefits and access agreements with aboriginal communities in the Northwest Territories and Alberta.

He said the nature and status of the federal talks remain confidential, but Imperial is “pleased with the progress we’re making” on the aboriginal front, “even with the Deh Cho,” the most significant aboriginal holdout.

Rolheiser said Imperial is not happy that the MGP regulatory phase has taken longer than anticipated, but there is a recognition on everyone’s part that there are “exceptional circumstances,” given the complexity, location and unprecedented scale of the undertaking and the fact that many regulatory boards and agencies had to be created to deal with the proposal.

What it comes down to for Imperial and the industry at large is further reinforcement for pleas to, in Rolheiser’s words, achieve some “regulatory clarity.”

He said Imperial has never wanted short-cuts, or fast-track treatment of the MGP file, but the delays for both the MGP and the company’s huge Kearl oil sands project are a “reflection of changing expectations on the part of society and our stakeholders” in resolving environmental issues.

New major projects office

Natural Resources Minister Gary Lunn acknowledged the concerns in April when he told representatives from public utility tribunals that the Canadian government has established a new major projects management office to speed up and bring consistency to regulatory approvals.

“We believe we can cut the regulatory approval times in half,” without weakening environmental standards, he said.

Through the office, proponents will be assured of moving through the approval process in agreed-upon timeframes, ending industry and government frustrations with the regulatory system for natural resource projects.

Lunn said it had become clear to him “the system could not respond to the changing environmental priorities” and that there was often duplication between different jurisdictions.

He said the National Energy Board is among those that have agreed to work with the major projects office.

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