Northwest Territories Industry Minister Dave Ramsay is increasingly pinning hopes on Alaska as an outlet for his region’s stranded oil and natural gas at a time when interest in developing those resources is gathering pace.
A series of meetings over the last year with Alaska legislators, along with the Yukon and Alberta, have pointed to the emergence of a “regional perspective” on energy development as the jurisdictions continue their discussions under the umbrella of the Pacific North West Economic Region, he said.
“The Alaskans have been receptive” to proposals that could see crude from the Alberta oil sands and northern Canada fed into the underutilized Trans Alaska Pipeline System and delivered to Valdez for export, Ramsay said, adding: “We’re fooling each other if we’re not thinking on a regional basis.”
The “northern option” is getting a fresh look as pipelines such as TransCanada’s Keystone XL and Energy East, Enbridge’s Northern Gateway and Kinder Morgan’s Trans Mountain expansion face potentially crippling political, aboriginal and environmental opposition.
With those mega-pipeline projects in trouble — although Ramsay emphasizes he wishes “only the best for all of them because we need them” — he said it’s time for the region to ask “what if” a pipeline could carry crude from Alberta and the Central Mackenzie Valley northward through the Gwich’in Tribal Council land in the Mackenzie Delta, into the Yukon and across to Alaska.
Alaska ‘didn’t say no’
When the idea was raised Alaska “didn’t say no (because) it’s important for them to have options” and look for means to pump new revenue into the state with TAPS operating at less than 25 percent of capacity, Ramsay said.
He said the NWT must also “continue talking” about other alternatives, notably feeding its gas into LNG exports from British Columbia.
Ramsay said the NWT can speak from experience about the costs of not acting on proposals after spending 10 years, four of them in the formal regulatory phase, on the Mackenzie Gas Project, before it was overtaken by a flood of new gas from shale deposits and got “put on the shelf for the time being.”
“We can tell a really sad chapter about what happened and what could have been” he said.
Ramsay also noted that the MGP gave the NWT an opportunity to involve aboriginal partners in the venture, with the Aboriginal Pipeline Group slated to take a one-third equity position in the pipeline.
He said companies that “have said outright that they don’t want aboriginal partners are too quick to say ‘No.’ Getting aboriginal people involved is the way we do business here in the NWT.”
“We want to see our resources developed in safe, sustainable manner and we believe the NWT is well-situated to be a key energy player well into the future,” Ramsay said, noting that the region is estimated to hold 35 percent of Canada’s total oil resources and 37 percent of its gas.
He said the fact that the MGP proponents — Imperial Oil as operator, ExxonMobil, Shell Canada and ConocoPhillips — are “willing to stay with the project is encouraging” and has been bolstered by indications from Imperial Chief Executive Officer Rich Kruger that the MGP could get a second wind as a source of gas feedstock for LNG exports.
In an October interview with the Globe and Mail, Kruger said a shift to LNG is a “serious” consideration.”
The consortium’s continued interest in the MGP was reinforced in mid-December when it updated the project’s costs to C$16.1 billion for a pipeline and gas-gathering system from C$11.3 billion in 2007, with the costs of developing the three anchor fields estimated at about C$4 billion.
Although the filing with the National Energy Board was largely a formality, Imperial spokeswoman Christine Graves told Petroleum News that her company will consider any “investment opportunities that provide the greatest shareholder value.”
But she cautioned that any attempt to link the MGP with joint plans by Imperial and its parent company ExxonMobil to proceed with an LNG project are premature.
Devolution on track
Of all the hurdles on which the MGP stumbled, the one that caused the most frustration and despair among the industry partners was a drawn-out regulatory process, which is now only three months from its most radical overhaul when authority is passed from the Canadian to the NWT government.
Ramsay said that “devolution” is on track for introduction April 1 “when we should be able to hit the ground running.”
He said the NWT will “use the size of our government to our advantage. We’re not some big, cumbersome bureaucracy. We can see the direct impact that decisions are going to have on people, on the economy and on our environment and we can act accordingly.”
The territorial government has no interest in allowing a ponderous regulatory process to “take opportunities away from the territory,” he added.
The change, including the collection of royalties, initially applies only to the onshore, but negotiations on sharing royalties from the offshore will start after April 1, while regulatory control over the offshore will remain with the National Energy Board for probably another 20 years, Ramsay said.
The Beaufort Sea includes close to C$2 billion in exploration work commitments (through a partnership of Imperial, ExxonMobil and BP and a standalone venture by Chevron), while “numerous discussions” have taken place with ConocoPhillips as it weighs the next round of exploration at its Amauligak discovery, Ramsay said.
But it “remains to be seen” whether companies can use advances in northern technology to satisfy the National Energy Board’s requirement for proof of a “same-season relief well, or an equivalency. We need to see some things happen and it’s important for us to work with the industry.”
On the front-burner are plans for the Canol shale oil play in the Central Mackenzie Valley where ConocoPhillips is ready to conduct horizontal drilling and fracturing of two wells and Husky Energy has scheduled four wells for this summer.
Although the play is focused on oil, if it “gets into commercial viability there’s going to be large volumes of natural gas and natural gas liquids” which in turn could have an impact on the economics of Mackenzie gas, he said.
