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Canada’s Arctic gas plans taking shape with breathtaking speed Gulf Canada leads way in forecasting Mackenzie Delta deliveries by 2006 as developments occur across a wide front Gary Park PNA Contributing Canadian Writer
Buoyed by growing demand in the United States and shrinking supplies in Alberta, Canada’s Arctic natural gas dreams are taking shape with breathtaking speed.
Gulf Canada Resources, now the industry pacesetter in the region, has made the boldest forecast yet, predicting gas could be flowing from the Mackenzie Delta of the Northwest Territories as early as 2006.
A company spokeswoman said the other Delta producers — Imperial Oil, Shell Canada and Mobil Oil Canada, all involved in a feasibility study — believe that is a reasonable target date, assuming production and pipeline facilities come together.
If anyone was inclined to doubt Gulf’s ambitious program, the lightning pace of development in the lower Northwest Territories might soften their pessimism.
By early May, the first commercial gas from Canada’s Arctic region was flowing at 70 million cubic feet per day from Chevron Canada’s K-29 well at Fort Liard — barely one year after the discovery of one of Canada’s top five wells was reported, with reserves estimated at 600 billion cubic feet.
Purcell Energy’s M-25 well, believed to tap the same pool, is scheduled to start producing by December at the same rate as K-29. By then, two pipelines, with combined capacity of almost 300 million cubic feet per day, will be connected to Westcoast Energy’s British Columbia pipeline network.
With an estimated 2 trillion cubic feet of reserves discovered so far in the Fort Liard area, Talisman Energy, Canada’s largest oil and gas producer, has decided it can no longer ignore the Arctic.
It has formed a joint venture with Purcell to explore for gas near Fort Liard, taking a 69 percent stake, bringing its expertise as a major producer from deep wells in the Canadian Rockies and its financial clout to help drill more wells at a cost of about C$10 million each.
As Talisman and Chevron expand their interests in Fort Liard analysts see that region as the first stepping stone up the Mackenzie River valley to the gas riches of the Delta and Beaufort Sea.
First Inuvialuit oil and gas sale held The quickening pace was reflected in the first oil and gas concession sale by the aboriginal-owned Inuvialuit Regional Corp., which collected C$75.5 million from four Mackenzie Delta properties covering 756,000 acres — two obtained by Chevron and one each by Petro-Canada and Anderson Exploration.
Another 445,000 acres failed to attract satisfactory bids.
The deal gives the Inuvialuit the right to claim up to 25 percent of any producing wells as well as collect royalties and receive job training programs.
Meanwhile, the federal government’s Northern Oil and Gas Directorate has invited bids on the largest Arctic land offering in more than a decade.
Following a strong response in 1999, when six parcels attracted C$183 million in work commitments, the agency is offering 10 parcels covering almost 750,000 acres — six near Inuvik and Aklavik in the Delta, four in the Beaufort Sea and two north of Tuktoyaktuk.
Successful bidders will have to commit a minimum C$1 million to each parcel to gain a nine-year license that requires at least one well to be drilled in the initial five years. The bidding deadline is August 14.
Aboriginal control and participation are issues In the midst of these developments, some of the larger pieces of the puzzle are also being moved into position, most involving aboriginal control and participation in the final project.
Canada’s Minister of Indian Affairs and Northern Development Robert Nault has signaled his desire to achieve an early resolution of the regulatory issue.
He said federal, Northwest Territories and aboriginal leaders will soon negotiate the transfer of regulatory control and revenue sharing from the Northwest Territories’ rapidly developing resource sector from the federal government to northerners. He had earlier indicated a formal transfer might be possible within four years.
“It is the intention of the government of Canada to move as fast as we can possibly move,” he said.
The need for a resolution is urgent if the government is to dampen unease and the first hint of hostility among exploration and production companies as they face strident demands from northern aboriginals.
The signals from native leaders became louder last month when Northwest Territories Premier Stephen Kakfwi laid claim to aboriginal equity in any pipeline from the Arctic. He has held preliminary talks with Prime Minister Jean Chretien and is close to submitted a formal proposal to the government.
Inuvialuit leader Nellie Cournoyea, a former Northwest Territories premier, said the aboriginal communities are targeting at least 51 percent of the project to give them control of any pipeline through their territory. But Kakfwi said there is no agreement on whether the stake should be 100, 75 or 5 percent.
The leaders also want 3,000 native construction jobs — hopes the Canadian Energy Research Institute dashed when it forecast pipeline construction would last only three years and generate only 100 aboriginal jobs.
Economic benefits versus control Imperial Oil spokesman Hart Searle said the desire by aboriginals to share the economic benefits is accepted. “But we need to understand what they mean when they talk about their interests and their aspirations,” he said.
Kakfwi said jurisdictional control is essential if the Northwest Territories’ 40,000 residents are to get an equitable share of government royalties from an Arctic gas project and the territories’ three diamond mines that could total C$1 billion a year within 10 years.
An official with a major pipeline company, who asked not to be identified, said the industry will think twice about taking high-cost gambles unless the natives reduce their demands.
“Do they have C$10 billion to invest in a pipeline?” he asked. “I think bankers who would fund a pipeline would see it a bit differently if project control was in the hands of aboriginals. The natives shouldn’t push too far or they won’t get a pipeline at all.”
However, Brian MacNeill, president of Enbridge (which operates two Northwest Territories pipelines and owns the world’s longest crude oil pipeline), took a more tactful route.
He said Arctic aboriginals can reasonably expect to have a stake in the ownership and operation of any gas pipeline from the Delta, although the size of that interest has yet to be negotiated.
MacNeill said any pipeline will cost in the range of C$4 billion and involve a consortium of owners, likely including Enbridge, TransCanada PipeLines and Westcoast.
But he said the final decisions rests with the gas producers, not the pipelines, suggesting deliveries could start between 2006 and 2010.
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