The head of Imperial Oil is far from ready to abandon the Mackenzie Gas Project, although he leaves no doubt that corporate sanctioning of the scheme hangs on a revival of natural gas prices and a fiscal deal with the Canadian government.
Chief Executive Officer Bruce March told reporters after an Imperial meeting with investors that he “wouldn’t say that the time for the Mackenzie has passed.”
“We remain hopeful,” despite the slump in gas prices in North America, the anticipated rise in the estimated C$16.2 billion cost of the Mackenzie Gas Project or MGP, and a dramatic shift in the continent’s gas markets during the seven years it took Imperial and its partners to obtain regulatory approval, he said.
“It’s fair to say that developments in North American natural gas, certainly, are understood and there are lessons learned there and it certainly factors into our thinking going forward,” he said.
Imperial and the government resumed talks last year on an agreement the partners hope will provide federal infrastructure funding for roads, airstrips and other facilities to advance resource development in the Northwest Territories, including the MGP.
March would only say that the two sides have not yet been able to agree on a deal, adding “there is nothing more specific to talk to you about right now.”
However, he did express some optimism that the fiscal discussions will soon hit a “sweet spot.”
Not viable at current pricesHe said the MGP could never be economically viable in current-day gas prices, forcing Imperial to look more towards the 2018-20 time period to start shipping gas from the Canadian Arctic.
“Our company predicts the demand for natural gas in North America will grow significantly and even around the world,” as more gas is used as a lower-carbon source for power generation, March said.
During the investor presentation, March and Imperial senior vice president of resources Glenn Scott pointed to a possible stepping stone in the NWT towards a Mackenzie Valley pipeline.
Scott said discussions are taking place with competitors in the Central Mackenzie Valley involving “synergies and opportunities to share” information on the possible development of what is likely to be a tight oil, tight gas play.
Imperial holds 250,000 acres in a joint venture with parent company ExxonMobil that requires drilling in the first five years of a nine-year license term.
Others who obtained licenses in a C$534 million bidding round last year included Husky Energy, which topped the list at C$376 million, ConocoPhillips and Shell Canada.
“We have been studying that opportunity for quite some time,” Scott said.
He said a decision to proceed with the MGP would make the Central Mackenzie a “lot more economically attractive” by providing pipeline transportation to southern markets, “but we’re a long way from that.
“First we need to drill, conduct tests and find out the productivity of the reservoir before we start on a development plan,” Scott said.
Building in stages?Although Imperial has not talked about building a Mackenzie pipeline in stages, others have suggested expanded pipeline capacity out of the Central Mackenzie could be a major step towards opening up the Mackenzie Delta and Beaufort Sea.
March said Imperial agrees with federal Natural Resources Minister Joe Oliver that the existing regulatory approval process is “slow, complex and cumbersome” and needs to be revised for major energy projects.
The House of Commons Standing Committee on Environment and Sustainable Development issued a report in March that contained 20 recommendations on ways to improve the federal process for environmental assessments and integrate environmental factors into planning and decision-making.
The committee called for binding timelines for all environmental assessments and the elimination of federal reviews when they are already required under provincial legislation.
Because of the dramatic shift proposed in the federal government’s role in environmental assessments, the opposition New Democratic and Liberal parties have made it clear they will right the changes.