Providing coverage of Alaska and northern Canada's oil and gas industry
April 2021

Vol. 26, No.14 Week of April 04, 2021

Hope for Canada’s Arctic

Partnership files plan with regulators to convert Mackenzie Delta gas to LNG

Gary Park

Petroleum News

It’s been the classic case of a line from the Rhyme of the Ancient Mariner - “water, water everywhere, but not a drop to drink.”

With some of the world’s richest oil and natural gas deposits on their doorstep, it has been a mystery and a source of deep frustration to communities in Canada’s Far North that they have been forced to truck energy over thousands of miles from the Vancouver region.

For decades, they have been challenged by endless hoops and barriers to access the oil and natural gas they need to heat their homes and keep their businesses operating.

Take the example of Inuvik, the Mackenzie Delta’s largest town with a population of 3,500, which has been forced to transport costly truckloads of propane from southern Canada to heat their homes and keep businesses operating.

Eight years ago, faced with a drastic decline in their only producing gas well, Inuvik even invited proposals to buy propane from Alberta.

Floyd Roland, a former premier of the Northwest Territories and mayor of Inuvik, wryly observed at the time that “it’s like me ordering up a truckload of ice from Alberta.”

“We are surrounded with snow and ice, the same way we are surrounded by natural gas … and we are having to truck it in because the cost of developing another site is too extreme for our customer base,” he said.

Roland said the shelving of the Mackenzie Gas Project - once the Far North’s best hope of a limitless fuel supply - has presented northern leaders with no choice but to “do other things to create a more sustainable scenario for our communities.”

Delta gas fields

Help may be at hand. An ambitious LNG project has been unveiled that could bring energy security to the region.

Inuvik is close to the three giant Delta fields that underpinned the C$16 billion MGP. They contain trillions of cubic feet of gas.

Until now, only a small field named Ikhil has been developed for Inuvik, but its reserves fell short of anticipated volumes, cutting its operating life to power a gas-fired plant to the 1999-2012 period.

That opened discussions involving the Northwest Territories government, Inuvik and other widely scattered communities with the MGP’s anchor partners on ways to tap into the Parsons Lake field with an estimated resources 1.8 trillion cubic feet - making it the smallest of the MGP fields. But he estimated capital costs of up to C$70 million to produce that stranded discovery, was deemed to be too high.

Inuvik then decided to switch to a synthetic natural gas system that would have involved vaporizing propane and mixing it with air.

The advantage of synthetic gas was that consumers could have continued to use their natural gas appliances.

The disadvantage is that consumers were told to expect rates of C$37 per gigajoule, double what they were paying before and up seven-fold from the cost of propane in Edmonton.

The desperate search for a made-in-the-Arctic solution turned to solar and wind options, but again nothing solid took shape.

Inuvialuit Energy Security Project

The best hope yet may have surfaced in mid-March with a plan to restore development of natural gas, led by Indigenous-owned Inuvialuit Petroleum Corp. and Texas-based Ferus Natural Gas Fuels.

The partnership has applied to the Canada Energy Regulator to approve the plans for a C$100 million Inuvialuit Energy Security Project to produce LNG.

Ferus, a unit of Energy & Minerals Group, aims to build a plant to produce LNG, propane and synthetic diesel, similar to a facility it currently operates in Alberta.

The partners said the Arctic operation could come on stream in early 2023, relying on Tuk M-18, a well discovered in 2002, 6 miles south of the Beaufort Sea community of Tuktoyaktuk.

The single well could yield an estimated 200 billion cubic feet of gas, enough to serve the region for 50 years, according to an application field with CER, with output estimated at up to 8 million cubic feet per day.

The filing said the project is targeted at countering “chronic energy insecurity” in the region.

The gas extracted from M-18 would be converted at the well-site to LNG and trucked to customers in the region.

Those overland fuel deliveries have recently been made possible by completion of an all-weather road covering 83 miles between Inuvik and Tuktoyaktuk, which has a population of almost 1,000.

Doug Matthews, an energy consultant and principal of Matthews Energy Consulting, told the Canadian Broadcasting Corp. that the Tuk M-18 project could not have been contemplated without the highway.

“The local market, which is Tuk, is not big enough to cover the costs of developing the field. With the road, you can reach other markets (by truck or barge) … and provide a cheaper alternative to diesel,” he said.

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