The Mackenzie Gas Project remains bogged down on three key issues, making the next two months “critical” to the hopes of developing Canada’s Arctic natural gas reserves, Paul Smith, Imperial Oil’s senior vice president, finance and administration, said Sept. 13.
“We’re well around first base, but we have a long way to go before we get home,” he told a Peters & Co. North American oil and gas conference in Toronto.
Ian Kilgour, Shell Canada’s senior vice president of exploration and development, told the same conference his company is “confident we can move the project forward,” but needs regulatory approval and a final decision by the partners no later than 2007.
He indicated the initial hopes of a 2009 start-up are no longer feasible and suggested 2010 is “probably on the optimistic side … it might be 2011.”
Smith told reporters the “next few weeks, the next few months” will determine whether the project is alive or dead, then decisions can be made when gas can start flowing.
For the C$7 billion project to get back on track after stopping project execution activities in April, the Mackenzie consortium needs a quick resolution of the aboriginal, regulatory and fiscal matters that caused the postponement, he said.
Smith said there has “been some good progress” in the last five months, but “we are looking for significant advancements.”
Kilgour said there has been a “significant response from all levels of government” since the time-out was called.
Issues that need work
On the three issues, Smith said:
• There are still no benefits and access agreements with aboriginal communities along the pipeline right of way, although negotiations are on-going.
• A definite regulatory process with precise timelines is still being sought.
• Fiscal terms with the Canadian government are unresolved.
Without setting any make-or-break dates, Smith made it clear that the “next few months are critical” if the Mackenzie project is to come on stream at 1.2 billion cubic feet per day, with the possibility of expanding to 1.9 billion cubic feet per day to accommodate shippers outside the anchor gas owners — Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada.
Must go ahead of Alaska gas line
He said there is “adequate” infrastructure in Alberta to handle gas from the Mackenzie Delta, but the Mackenzie must be completed ahead of the proposed Alaska gas project.
Smith said the federal government’s offer of C$500 million to help aboriginal communities in the Northwest Territories accommodate the social and economic impacts of a pipeline was a “good step.”
But he sidestepped a question on whether Imperial was happy with the state of negotiations.
“Happy is a difficult word,” he said, having earlier said “progress will need to be made to allow the project to continue.”
Smith noted that C$350 million has already been spent by the partners on field work, environmental assessments and preliminary engineering.
