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Shell pulling out of Mac Sets Aug. 31 deadline for bids on Niglintgak discovery, APG confident in interest Gary Park For Petroleum News
Whether it will be business as usual under changed ownership, or a damaging blow to an already uncertain operation might be known by the end of August — the deadline Shell Canada has set for accepting bids to acquire its 11.4 percent stake in the Mackenzie Gas Project.
To little surprise from those conversant with the project, Royal Dutch Shell has decided to shift the focus of its Canadian unit away from its Mackenzie Delta gas holdings to other assets, notably the Alberta oil sands and British Columbia shale gas prospects, which could be tied to an LNG export venture.
The primary northern asset is Shell’s 1971 Niglintgak discovery, which contains an estimated 1 trillion cubic feet of recoverable gas. It is one of three fields that underpin the MGP.
The other corporate gas owners are lead partner Imperial Oil, with a 34.4 percent stake from its 100 percent ownership of the 3 tcf Taglu field, and ConocoPhillips and ExxonMobil Canada with 15.7 percent and 5.2 percent respectively through the 1.8 tcf Parsons Lake find.
In addition, the Aboriginal Pipeline Group, which owns no gas in the region, has an option to secure a 33.3 percent equity stake if it can obtain matching gas volumes from independent producers for the proposed Mackenzie Valley pipeline.
Shell making data available Shell said it is making relevant data, including its interests in Niglintgak, seven other pools and the pipeline, available to a “broad group of prospective purchasers.”
It promotes the Delta in its sales documents as “an exciting, basin-opening opportunity that provides a gateway to the Beaufort Sea and is important for economic development in the Canadian Arctic.”
“However, as part of its regular global portfolio review, Shell has decided to focus its resources on other options.”
What is unclear is whether the Shell review will have an impact on its successful combined bids of C$43.4 million in June for 100 percent of three parcels in the Central Mackenzie Valley of the Northwest Territories.
Strong hints of Shell’s wavering on the MGP emerged four years ago when Royal Dutch Shell acquired the remaining 22 percent share of the Canadian operations it did not already own.
Adrian Loader, Shell Canada’s “caretaker” president at the time, said there would be a comprehensive review of all Canadian activities, including the MGP.
That was a shift from earlier support for the MGP from Shell Canada’s last chief executive officer, Clive Mather, who said the fundamentals of bringing the stranded gas to market and opening up a new supply basin were “strong,” although he conceded the challenges of making an investment decision were “going to be tough.”
Shale gas erodes confidence However, his observations preceded the sudden explosion of interest in developing North America’s vast shale gas resources, which has further eroded confidence in the MGP. Partly as a result of seven years of regulatory reviews that cost an estimated C$1 billion, MGP costs are expected to be higher than the last official price tag of C$16.2 billion.
The decision to pull out comes only three months after the MGP received approval from the Canadian government, giving the proponents until December 2013 to decide whether they will proceed with a commercial development.
Still to be negotiated are a fiscal regime with Ottawa and a benefits-and-access agreement with the Dehcho First Nations.
None of the remaining MGP partners has shown any interest in bidding for the Shell Canada assets, although APG chairman Fred Carmichael told reporters said his group is “not really concerned” about the outcome of the sales process.
He said the APG believes there will be “plenty of interest from companies out there who would love to step up to the plate and take over.”
One contender could be Korea Gas Corp., which has made a C$30 million investment in the gas holdings of MGM Energy, which include a significant discovery license awarded for the Umiak find.
Officials of the Korean state-owned company have indicated they are prepared to study the economics of shipping LNG from the Canadian Arctic, based partly on predictions of a longer open-water season in the Beaufort.
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