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Phillips, Conoco union a plus for Arctic gas development
Gary Park
A union of Phillips Petroleum Co. and Conoco Inc. will be positive for the future of Arctic natural gas by ensuring that neither the North Slope nor the Mackenzie Delta basins get left on the shelf, said a spokesman for Conoco's Canadian subsidiary.
Given the strong interest of both companies in Arctic gas “there will be a desire to try and see both sets of resources getting developed,” Peter Hunt told reporters Nov. 19.
He said the merging of Phillips and Conoco, to become the No. 5 oil and gas producer in Canada, will give impetus to the search for economically feasible ways of developing the North Slope and Delta reserves.
Hunt dismissed fears that a race between the two basins to come on stream first could see one of them stranded.
Because the merger proposal won't go to a shareholder vote until next year, Hunt said Conoco, which acquired Gulf Canada Resources Ltd.'s Delta gas holdings earlier this year, will continue working with Imperial Oil Ltd., ExxonMobil Canada and Shell Canada Ltd. on the Delta feasibility study, which is expected to be finished either this year or early in 2002.
Conoco focus has been on Mackenzie Following the Gulf Canada takeover, Conoco chairman Archie Dunham said his company would take a more active role in pressing for development of the Mackenzie Delta.
At the time, because Conoco had no stake in Alaska, he said “our sole interest right now is going to be Canada and the Mackenzie Delta, so we have no potential conflict of interest around choosing this (pipeline) route over another route.”
Regardless of the Phillips-Conoco deal, Canadian analysts said they still believe the Mackenzie Valley pipeline option has the best chance of proceeding first.
William Lacey, with FirstEnergy Capital Corp., said the merger won't change the fundamentals of Arctic development, because both projects still face political and economic hurdles, notably the tumble in gas prices this year.
In those circumstances, he said the smaller Mackenzie Valley line is closer to market, which is vital for all four Delta partners who need gas for their extraction and processing operations in Alberta's oil sands and heavy oil sectors.
Peter Linder of Research Capital Corp. agreed that the Mackenzie Valley is “just a more sensible route,” with at least 50 percent of the Delta gas volumes likely to be used in the oil sands.
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