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Mackenzie project lives NWT premier reports ‘some progress’ on fiscal issues; Imperial confirms ‘dialogue’ Gary Park For Petroleum News
Canada’s Mackenzie Gas Project has received a fresh infusion of hope with confirmation that discussions on a fiscal framework are under way between project leader Imperial Oil and the Canadian government.
The election in May of a majority federal government under Prime Minister Stephen Harper is viewed as the spark that has ended what Imperial spokesman Pius Rolheiser said was a “temporary hiatus” in the dialogue.
Bob McLeod, newly elected premier of the Northwest Territories, said he understands “some progress” has been made.
He said the Aboriginal Pipeline Group, which has been offered a one-third equity stake in the proposed Mackenzie Valley gas line, and its members have held meetings with a number of federal government cabinet ministers.
“They seem to have received some positive signals,” McLeod said. “In their view, everything is looking promising and we (the NWT government) are cheering them on.”
He said that although he did not have access to the details, the indications are “very promising,” but he emphasized that important deadlines are looming.
First deadline in 2013 Canadian government approval of the project last March gives the partners — Imperial 34.4 percent, the Aboriginal Pipeline Group 33.3 percent, ConocoPhillips 15.7 percent, Shell Canada 11.4 percent and ExxonMobil Canada 5.2 percent — until December 2013 to provide updated cost estimates and a decision to proceed with the MGP. (Shell said four months ago that it was open to bids for its stake, including 100 percent ownership of the 1 trillion cubic foot Niglintgak field and seven other pools. The company said it was making relevant data available to a “broad group of prospective purchasers” after deciding to “focus its resources on other options” in the Alberta oil sands and British Columbia shale gas plays. It has yet to announce a deal.)
McLeod said that leaves only two years for the partners to complete engineering and geotechnical work and for the Canadian government to include a fiscal package of royalties, taxes and other items, in its next budget which is expected in February or March 2012.
The government approval also requires a start on construction in 2015 to allow the first shipments of gas from the Mackenzie Delta in 2018.
2013 deadline ‘challenging’ However, Rolheiser said the proponents have indicated the 2013 deadline “will prove challenging, if not difficult to achieve and will be dependent on how long it takes to reach agreement with the federal government on fiscal terms.”
He said the framework is essential to restaff and resume engineering, permitting and field work that was suspended in 2007 “in order to see thousands of permits we need before we can make a decision to construct.”
The framework has been “under discussion with the federal government for quite some time. Our objective remains to work with the government to develop a framework that provides an appropriate balance of risk and benefit to the investors and for the government of Canada,” Rolheiser said.
But, because of the confidential nature of the discussions, he would “not go any further into what may or may not be under discussion.”
New NEB study A new National Energy Board study released Nov. 22 gave a lift to the MGP by predicting gas prices will strengthen enough to justify delivering gas from the Mackenzie Delta by 2020, although McLeod said his government is still looking at late 2018 or early 2019 as the startup date.
The study, which forecast Mackenzie gas can start flowing when prices rise above US$5.50 per million British thermal units, said the Arctic gas will be needed regardless of the projected growth of shale gas production.
It said Canadian gas output declined 15 percent from 2008 to 2010 and will continue that trend through 2015 to 13.1 billion cubic feet per day, before resuming growth again in 2016 when gas from the Arctic and unconventional deposits start driving production towards 18 bcf per day in 2035.
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