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Mac buyout talk rebuffed Imperial says no way, feds say future up to private sector; newspaper stands by story Gary Park For Petroleum News
The Mackenzie Gas Project is not dead and Imperial Oil is not stepping aside as operator, says Pius Rolheiser, spokesman for the lead partner.
The Canadian government has “no interest” in either partially, or wholly buying out the corporate partners, says federal Indian Affairs and Northern Development Minister Jim Prentice.
“It is not on the table and it is not part of the discussions,” he said. “It’s a project brought forward by the private sector and it has to make sense for them.” For the record, that’s the “straight goods” from the key players.
But the National Post, one of Canada’s two national dailies, is not backing down from two days of stories quoting sources close to negotiations between Ottawa and the Mackenzie consortium that the government is pondering replacing Imperial at the controls by reimbursing the partners for the costs incurred so far which total about C$600 million.
The speculation was based on Post information that Imperial, ConocoPhillips and Royal Dutch Shell had told the government the project was uneconomic without substantial incentives such as tax breaks and that they were considering the merits of government ownership of the pipeline along with TransCanada and the Aboriginal Pipeline Group.
Imperial: if project dead, it would have to make an announcement
Beyond conceding that if the project were dead, Imperial would be obliged to make an announcement, Rolheiser was tight-lipped on the status of negotiations on the fiscal framework for the MGP.
He said the talks are “sensitive and confidential.”
“We are continuing to negotiate with the federal government to develop a fiscal framework,” he told Petroleum News.
That, along with benefits and access agreements with aboriginal communities along the pipeline route and regulatory approvals, remains the essential precondition before any corporate sanctioning is possible, Rolheiser said.
In an updated submission to the National Energy Board, the co-venturers have indicated corporate approval is needed in 2009 to start gas shipments by 2014, the earliest possible startup date as viewed by the anchor gas field owners.
But Rolheiser emphasized that the partners are not tied to a timetable.
Their only interest currently is to “move the negotiations (with Ottawa) forward.”
He said that at no time has Imperial told the government the project is dead, contrary to sources quoted by the Post.
Report that government stake tied to jump in cost estimates The newspaper reported Randy Meades, the government negotiator from Prentice’s department, as saying the corporate partners made a shift toward a government equity stake earlier this year when the MGP cost estimates jumped to C$16.2 billion from C$7.5 billion.
He said the option needed to be fleshed out “a little bit before we understand what it means.”
Fred Carmichael, chairman of the APG, which has an option to own one-third of the pipeline, agreed Ottawa was considering at least partial ownership because it believes the MGP is commercially sound.
He said there are many entities, including the APG, that would be happier with much less than the 25 percent rate of return Imperial is seeking.
Other sources were reported by the Post as saying Ottawa was unhappy Imperial has forced the government into a corner by making excessive demands to offset some of the construction costs.
He said the government views the MGP as a chance to open up exploration in the Mackenzie Delta and Beaufort Sea and was ready to do what it could to advance that national interest.
Carmichael told The Canadian Press news agency that many options are being floated because of delays in the regulatory process and negotiating fiscal terms.
“APG certainly welcomes the possibility of federal involvement in the project,” he said.
Prentice: Imperial has not said pipeline dead However, Prentice was emphatic that at no stage have Imperial executives told him the pipeline is dead.
“They have never said that or anything approaching that,” he said. “They are moving forward with their regulatory application.”
Prentice said the government is still open to deploying a variety of “fiscal enhancements,” such as royalty or tax breaks, to reach agreement with Imperial.
At the same time, he has told Imperial the project “must make sense from a business basis. … It is not a social project … it’s a piece of basin-opening, private sector oil and gas infrastructure.”
That was a clear message from the federal cabinet point man that Ottawa wants the MGP to open the door to northern exploration by ensuring independent gas producers have access to the Mackenzie Valley pipeline.
Bob Reid, president of the APG, told the Post a strong government equity position would be a “very good thing” for APG, which needs to secure supplies from outside the anchor fields if it is to be a part-owner of the pipeline.
He said the MGP in its present form, with a price tag of C$16.2 billion, is “simply not economic for the producers.”
But Rolheiser said a government equity position does not overcome the fundamental economic challenges faced by the MGP, although the partners are ready to discuss any and all options.
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