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Vol. 15, No. 39 Week of September 26, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Mackenzie a ‘must’

NWT cabinet minister pressures government to invest in Mackenzie Gas Project

Gary Park

For Petroleum News

The Mackenzie Gas project “must be built” to support Canada’s shift to a low-carbon future and to enable the Northwest Territories to realize its energy development potential, NWT Industry Minister Bob McLeod told the World Energy Congress in Montreal.

In taking one of his strongest positions yet, McLeod said it is time, after a regulatory process that has stretched over six years, for the Canadian government to “become engaged and support this critical project.”

He said the MGP could contribute C$86 billion to the Canadian government, most of it spread across Canada’s provinces, but nothing can happen until the federal government and project proponents negotiate a fiscal agreement.

“We have heard about the critical role of natural gas as a transition fuel to a low-carbon economy,” McLeod said.

“Our federal government announced in June that it was mandating the phasing out of coal-fired power plants in Canada that produce tremendous amounts of greenhouse gas emissions.

“These coal plants will need to be replaced with natural gas plants. In the NWT we have an estimated 80 trillion cubic feet of natural gas reserves.”

In addition to moving ahead with the MGP, he said the Canadian government “must become meaningfully engaged and invest in the people and infrastructure” need to develop the NWT’s energy resources, which include 1.2 billion barrels of discovered oil and an estimated ultimate potential of 7 billion barrels.

“We need investment and we need partners, particularly the federal government. If Canada wants a sustainable presence in the North, investment in the North is required so we can realize our energy development potential,” McLeod said.

Support from Yukon

Yukon Energy Minister Patrick Rouble said his government is a “strong supporter” of an overland gas pipeline from the North Slope, across the Yukon to the Lower 48.

McLeod’s case for expanding the role of gas was a major theme at the congress.

British Columbia Energy Minister Bill Bennett said that despite recent problems with Enbridge’s North American pipelines and BP’s Gulf blowout new pipelines will be built to carry growing volumes of B.C. shale gas and crude from Alberta’s oil sands to the West Coast for tanker shipment to Asia.

Bennett conceded pipelines are “obviously controversial today,” but they are vital to move production to the Pacific Coast and will involve a “lot of activity in the next 20 years.”

Shale gas development is also a fast-emerging issue in Quebec, where hydroelectricity has driven economic growth for the past 50 years.

Quebec Natural Resources Minister Nathalie Normandeau, despite opposition from environmentalists who want a moratorium on shale production until the environmental impact has been studied, said she is “more convinced than ever” of the need to develop Quebec’s resources after meeting with officials of the International Energy Agency.

Andre Caille, chairman of the Quebec Oil and Gas Association, representing 18 companies involved in shale gas exploration in the province, said risks are associated with any energy source.

But he said the science exists to treat the water used in hydraulic fracturing of shales and the use of chemicals in the process.

Major gas realignment

The growth of shale gas resources and supplies is “creating a major realignment of the North American gas market,” Pete Stark, vice president, industry relations for consulting firm IHS Energy, told petroleum geologists in Calgary Sept. 13.

But he urged companies to be cautious to avoid flooding the market with more capacity than it can absorb, raising questions about the economic viability of developing Mackenzie Delta and North Slope gas.

He said IHS is forecasting soft price fundamentals at least into 2012, noting it will be difficult for that price to spike given the large volumes that can be produced at a relatively low cost.

Of the 32 largest shale plays in North America, Stark said the Marcellus and Haynesville in the United States and Montney and Horn River in British Columbia have a recoverable resource of 520 tcf that could break down to 27 tcf of annual production with a long-term development cost of under US$4 per thousand cubic feet.

Richard Herbert, Talisman Energy’s executive vice president of exploration, told the geologists that his own company’s production will soar from 10 million cubic feet per day at the beginning of 2009 to 300 million cubic feet per day by the end of 2010.

Stark said a key issue for shale operators in Western Canada is whether the gas can be exported to Asia through the proposed Kitimat LNG project by Apache and EOG Resources.

John Harper, Calgary director of the Geological Survey of Canada, said his agency has also identified gas hydrates on every shore in Canada, which are now areas for future study.

He said the GSC, which recently completed a 10-year study at Malik in the Mackenzie Delta., has learned that it is possible to produce hydrates although longer production tests are needed.

Harper also said 26 of 48 wells drilled in offshore Newfoundland and Labrador have shown gas hydrates.

He said C$100 million in federal funding for seismic programs in the Arctic Ocean, primarily to establish Canada’s sovereignty claims, will provide insight into potential hydrocarbon activity.

“The geosciences knowledge that we generate is critical for state-of-the-art analysis of basin systems,” Harper said.

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