Oil Patch Insider

Doomsday clock edges closer to midnight for Mackenzie line; FEX to release Alaska budget at Meet Alaska conference

The thought on a growing number of Canadian minds is now out in the open.

The Mackenzie Gas Project is the pipeline “nobody wants anymore,” said a headline in the Financial Post.

The story speculated that the MGP might find its way into the federal government’s upcoming budget as a national infrastructure project to help pump life into the economy by creating jobs across Canada, while reinforcing Canada’s claims to Arctic sovereignty and offering a secure, green source of energy.

The government itself dropped a similar hint three months ago when it declared that gas in Canada’s North “represents both an untapped source of clean fuel and unequalled avenue to creating economic opportunities for northern people.”

“Our government will reduce regulatory and other burdens to extend the pipeline network into the North,” the government said in opening a new session of Parliament.

The Post then suggested that even if the government puts money on the table it would be a surprise if the MGP partners, led by Imperial Oil, who were “once ready to put up billions (to build the MGP) remain interested.”

By the time the regulators have completed their work they will have taken longer than the time needed to build a pipeline and their work will have become irrelevant, the Post argued.

But it’s not yet clear that the MGP is a lost cause, even though this winter’s drilling in support of a pipeline is confined so far to only one company, MGM Energy.

The Aboriginal Pipeline Group, which has the option of acquiring a one-third equity stake in the proposed Mackenzie Valley pipeline, plans to test the financial markets to determine if it can raise its share of the money.

The group has been talking to RBC Capital markets, its financial handler, and to other banks, who have indicated lenders are ready to support solid projects such as a regulated pipeline.

Imperial is not giving any hints that it is on the verge of abandoning the venture, but, like most others with a vested stake, is frustrated by the regulatory delays.

But the rising sense of anger within the industry and Northwest Territories communities may have reached federal ears.

Western Canadian energy ministers believe, after meeting with federal Natural Resources Minister Lisa Raitt on Jan. 12, that the Canadian government is about to start slashing red tape and speeding up major industrial projects.

Raitt said at the conference “we need to push through on projects and not let man-made interventions happen.”

She said environmental assessment, permit approvals and “every aspect of regulatory oversight from the federal government” should be moving faster.

Northwest Territories Industry Minister Bob McLeod reminded Raitt that the MGP is of major interest to the North.

“We think Ottawa should ensure the framework is in place so the project can go ahead quickly once the approval process is complete,” he said.

With that kind of lobbying in full swing, it may be too hasty to count the MGP as being down and out. What isn’t in question is that the doomsday clock is edging closer to midnight.

FEX to release Alaska capex at Meet Alaska

The budget was set assuming a US$40 per barrel WTI oil price and Nymex gas at $5 per million BTU (British thermal units).

Manzoni did not break out a capital budget for Alaska, something his public relations office told Petroleum News would be announced at the upcoming Meet Alaska conference in Anchorage on Jan. 23.

The most recent information from the company about its Alaska exploration and development plans, which falls under Talisman subsidiary FEX, is that its Alaska plays fit the Talisman’s overall strategy.

Manzoni said Talisman is moving toward “bigger prospects, which can renew the company,” information that bodes well for FEX’s significant discoveries in the National Petroleum Reserve-Alaska.

But Talisman has not yet decided whether to approve funding to start bringing technical personnel back to Alaska this quarter in preparation for drilling wells in the winter of 2010.

The company has a “flexible approach to spending,” so that it can spend more money on capital projects or “dial back” if oil and gas prices are significantly higher or lower than its projections, Manzoni said.

“It may prove better value to buy than to build in the current environment.”

New BP rigs might be additions to fleet

BP’s Alaska spokesman, Steve Rinehart, told Petroleum News Jan. 8 that the “intent of the new rigs is to improve safety and environmental performance and to improve rig work efficiency. We have not decided if these will replace any existing rigs or add to the current rig fleet. That will depend on plans and budgets for 2010 and beyond.”

He also said the rigs were designed to work in any of the fields BP operates in Alaska.

One of the rigs, a workover from Doyon Drilling, is coming to Alaska via a Crowley sealift this summer.

Rinehart said the other two rigs, ordered from Parker Drilling, will be shipped to the North Slope in 2010, but BP has not yet decided how the rigs will be transported.

BP ordered a third drilling rig from Parker for its Liberty project; that rig is coming up as part of Crowley’s sealift this summer.

Exxon Arctic development VP latest addition to Meet Alaska line-up

Mike Flynn, the vice president in charge of Arctic development for ExxonMobil Development, has joined the list of top industry executives scheduled to speak at the Alaska Support Industry Alliance’s annual Meet Alaska energy conference on Jan. 23 in Anchorage.

There’s still time to register for Alaska’s premier energy conference. In order to guarantee a seat, register online at www.alaskaalliance.com or call 907 563-2226.

—Gary Park, Eric Lidji and Kay Cashman