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Meyers: Room for the feds ConocoPhillips’ Canada chief: Government stake in Mac gas line not show-stopper Gary Park For Petroleum News
Take your pick. It could be one small step, or one giant leap.
Whatever the interpretation, Kevin Meyers, president of ConocoPhillips Canada, gave the broadest hint yet that not all partners in the Mackenzie Gas Project are opposed to an equity role for the Canadian government.
In a series of interviews, he let it be known that under the right conditions, a government stake would not trouble ConocoPhillips.
“Having the government of Canada as an equity partner, I don’t think that’s a show-stopper for us,” he told the Financial Post.
“It’s like any business deal when you are dealing with any business partner. What are the terms and conditions? So, under the right terms and conditions, I think ConocoPhillips would accept the government as an equity partner.”
Dangling that prospect represented one of the boldest attempts yet to break part of the logjam that is slowing progress on a project where time is one of the greatest enemies.
Imperial has been cool to government equity Lead partner Imperial Oil has generally been cool to the idea of taking the government aboard, seeing no reason why a federal investment would improve the economic case for developing 6 trillion cubic feet of Mackenzie Delta gas.
ConocoPhillips has inherited from Gulf Canada Resources 75 percent of the Parsons Lake discovery made in 1972 that has estimated marketable reserves of 1.826 tcf, plus gas liquids. ExxonMobil holds the remaining 25 percent.
The other industry partners are Imperial, with its Taglu discovery of 3 tcf and Shell Canada’s 970 billion-cubic-feet Niglintgak discovery.
After allowing for a 33.3 percent interest which may or may not be taken up in full by the Aboriginal Pipeline Group, the ownership breakdown is Imperial 34.4 percent, ConocoPhillips 15.7 percent, Royal Dutch Shell 11.4 percent and ExxonMobil 5.2 percent.
The Canadian division of ConocoPhillips is also active outside the three anchor fields, even more now that it has Burlington Resources assets under its umbrella, including a partnership with Chevron Canada and BP Canada Energy.
Along with EnCana (which has since tried to unload Arctic assets that it doesn’t see as core to its operations) and Anadarko (whose Arctic holdings went to Chevron in a North American asset swap), ConocoPhillips has been involved in a discovery of up to 300 bcf at the Umiak site.
Conoco has suggested ConocoPhillips Canada and its predecessor Canadian companies have consistently been in the forefront of Arctic gas development, going as far in 2000 as to suggest gas could be flowing as early as 2006.
When he was president of Conoco Canada, Henry Sykes urged the federal government to more actively promote a Mackenzie Valley pipeline, observing: “I think at some point the government will have to come on board and say that Canada is best served by a pipeline from the Mackenzie Delta.”
Conoco Chairman Archie Dunham in 2001 made the Delta “priority No. 1” for his company, setting a timetable of five to eight years to get gas from the Arctic to southern markets.
On other matters, Meyers said his company is:
• On the verge of startup at the Surmont oil sands project, a joint venture with France’s Total. The initial phase (budgeted at C$1.4 billion, but expected to cost more) is designed to produce 25,000 barrels per day. A decision is likely next year on whether to embark on a second phase as part of Surmont’s eventual goal of 100,000 bpd.
• Outside of the oil sands, the exploration budget has been trimmed by C$1 billion this year because of higher drilling costs and flat natural gas prices. Meyers said ConocoPhillips Canada, currently Canada’s third largest gas producer, has sufficient opportunities that it can afford to slow spending until the “cost side of the equation adjusts favorably.”
• The federal government’s decision to end an accelerated capital cost allowance in the oil sands, the Alberta government’s review of its oil sands and conventional royalties and imminent federal legislation on greenhouse gas emissions could delay projects, but Meyers doubts the moves will kill off any ventures.
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