The Mackenzie Gas Project faces taking a back seat to Alaska’s Arctic gas plans for “a long period of time” unless there is a speedy resolution of access and benefits agreements with aboriginals and a negotiated fiscal package with the Canadian government, Imperial Oil Chief Executive Officer Tim Hearn said Oct. 6.
“Under current conditions, we don’t have an economic project,” he said after speaking to the Calgary Chamber of Commerce.
Without getting into the details of the government talks, he said Imperial is “looking at cash flow timing things and how we may construct the framework in such a way that it will make it economic.”
Hearn would not comment on claims by the Sierra Club of Canada that federal sources had put a figure of C$2 billion on the Mackenzie partnership’s demands.
Imperial has promised Canada’s National Energy Board it will decide in November whether it is ready to enter public hearings, which would be expected to start in early 2006.
“We’d like to go to hearings, but we’re not there yet,” he said. “We really need to come to some conclusions that make sense for everybody.”
Hearn indicated that the Mackenzie proponents want to ensure cost recovery of the C$7 billion capital investment in the project.
“We’re not asking for handouts and we’re not asking for giveaways,” he said, dismissing some speculation that royalty breaks have been requested.
He characterized negotiations as being at a “sensitive and critical stage.”
“If this thing drags out and drags out, I believe Alaska will get built,” draining available construction labor and materials and impacting North American gas prices.
Hearn would not comment on the gas price Imperial is basing its plans on, but guaranteed that if LNG imports meet projections gas will not approach recent levels of US$14 per thousand cubic feet.
Calgary-based investment banker Tristone Capital said the Mackenzie project could recover its costs and generate a 10 percent return at gas prices of US$3.10 per thousand cubic feet.
Partners in Mackenzie Gas Project are Imperial Oil (69.9 percent owned by ExxonMobil), Shell Canada, ConocoPhillips Canada and ExxonMobil.
