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Regulator weighs Mac pipeline study National Energy Board to consider disputed report that finds Mackenzie project can turn a profit without government subsidies Gary Park For Petroleum News
A financial analysis concluding that the Mackenzie Gas Project can be profitable without government subsidies will come under the regulatory microscope.
A spokesman for the National Energy Board told CBC News that the federal agency will receive the report because it may be relevant to the economic feasibility of the pipeline.
The study, commissioned by the Yellowknife-based social justice group Alternatives North, found that based on current public cost figures for the project the three anchor gas fields on the Mackenzie Delta would generate an average rate of return for the owners of 29 percent per year, peaking at 41.8 percent for the Taglu field owned by lead partner Imperial Oil.
Prepared by Pacific Analytics, an independent resource economics consultant, the report was filed with the Joint Review Panel, which is reviewing the environmental and socio-economic impacts of the project.
Report author Jim Johnson said that each 10 percent rise in gas prices would boost the overall rates of return by 2-3 percent.
He also stacked the Mackenzie project up against the government taxation and royalty regime in Norway, where the public sector assumes “a significant share of the risk of exploration and development” and the government takes a larger chunk of any windfall profits resulting from energy price rises.
Norwegian-style regime would bump government take That analysis showed the rates of return to Mackenzie proponents would be reduced by only 2.5 percent if a Norwegian-style regime was applied to the Mackenzie project, while revenues going to the government would be C$17.2 billion higher over a 20-30 year operating life.
Imperial has taken issue with the report, holding firm to its assessment that the project economics are marginal.
The National Energy Board is waiting for an updated budget estimate for the project which is expected to see a sizeable increase in the current projection of C$7.5 billion when it is released early in 2007.
Until then the board does not know whether the hearing schedule, due for completion about mid-December, will be extended.
In the meantime, the Joint Review Panel postponed three of four hearing days in December following a Federal Court of Canada ruling that the northern Alberta Dene Tha First Nation had not been properly consulted on the pipeline.
Panel chairman Robert Hornal said in a letter to stakeholders that the Dene Tha decision has forced an adjustment of the panel’s schedule.
He said the panel “will continue to carefully consider the remainder of its public hearings,” which are supposed to wrap up by mid-April, in light of the court ruling.
Regardless of these changes, federal Indian Affairs and Northern Development Minister Jim Prentice has said there is no reason for the court decision to slow the project, although Imperial said it is unsure whether the ruling will introduce new hurdles.
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