October 07, 2004 --- Vol. 10, No. 84October 2004

Mackenzie gas project enters formal regulatory process

The Mackenzie Gas Project has taken a large step forward, with the filing of the main regulatory applications.

Lead partner Imperial Oil announced today that approvals are now being sought from federal and Northwest Territories agencies, ending speculation that the project was in trouble.

The consortium partners put the cost of developing the three anchor fields on the Mackenzie Delta, building gas gathering pipelines and related facilities and building a Mackenzie Valley pipeline at C$7 billion — C$2 billion higher than initial estimates.

The applications propose an initial gas pipeline capacity of 1.2 billion cubic feet per day, with provision to expand and handle gas from other fields.

Earlier indications pointed to the gas owners — Imperial Oil, ConocoPhillips Canada, Shell Canada and ExxonMobil Canada — delivering 800 million cubic feet per day from the three anchor fields, which have reserves of about 6 trillion cubic feet.

The Aboriginal Pipeline Group, which has an option to take a one-third equity stake in the pipeline, is trying to secure 400 million cubic feet per day from producers outside the anchor fields.

Imperial emphasized in a statement that a final decision to proceed and achieve the start-up date of 2009 still hinges on obtaining regulatory approvals and resolving issues such as benefits and access agreements with aboriginal communities in the Northwest Territories, an assessment of natural gas markets, updated project costs and firm fiscal terms.

It said those matters are “essential to the development of a firm project schedule and will be critical to a final construction decision.”

Standing in the way are two lawsuits filed by the Deh Cho First Nations, in a bid to halt the environmental review process.

Without referring directly to the Deh Cho, J. Michael Yeager, president and chief executive officer of Imperial Oil Resources, said the project is a significant employment and business opportunity for all residents of the Northwest Territories.

But he said a “number of critical activities are in progress.”

Henry Sykes, president of ConocoPhillips Canada, said the cooperation among multi-stakeholders in achieving the regulatory filings “needs to be maintained and broadened to overcome the many challenges that remain” before the Mackenzie consortium can move to construction.

Fred Carmichael, chair of the Aboriginal Pipeline Group, said aboriginal ownership in the project could make a “significant difference in the North” and help “deliver long-term benefits to our aboriginal stakeholders.”

Editor’s note: See complete story in Oct. 17 issue of Petroleum News.

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