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Finally, it’s a go Funding deal with aboriginals boosts Mackenzie Delta gas pipeline momentum Gary Park Petroleum News Calgary Correspondent
Canadian Arctic natural gas could be flowing to southern markets between 2008 and 2010 under a breakthrough funding deal with Northwest Territories aboriginals that clears a major obstacle to the C$4 billion Mackenzie Gas Project.
Stalled for eight months by complex negotiations, the pact brings development of 6 trillion cubic feet of Mackenzie Delta gas within reach after decades of dashed hopes.
Proponents said June 18 that a preliminary information package has now been submitted to regulators and should be followed by a full application in 2004, launching a possible three-year phase of studies and public hearings into an 800-mile pipeline from the Delta to a terminus in northern Alberta.
The pipeline itself is expected to cost C$4 billion, with another C$1 billion earmarked for field development.
Assuming approvals, the line will initially carry at least 800 million cubic feet per day, but compression facilities along the route will allow capacity to grow to 1.2 billion and possibly 1.9 billion cubic feet per day.
Underpinning the June 18 breakthrough, Calgary-based pipeline TransCanada will lend C$80 million to the Aboriginal Pipeline Group to cover a one-third share of preliminary engineering and environmental studies.
The Aboriginal Pipeline Group is also eligible to use TransCanada funds to support financing its share of construction costs. TransCanada has option Should firm shipping commitments rise above capacity of the three anchor fields — Niglintgak, Taglu and Parsons Lake — the Aboriginal Pipeline Group will be entitled to first increase its interest up to one-third for 10 years after start-up.
In exchange, the Delta gas owners — Imperial Oil 50 percent, ConocoPhillips Canada 25 percent, Shell Canada 17 percent and ExxonMobil Canada 8 percent — will give TransCanada an option to buy 5 percent of the project, along with a guarantee that the Arctic gas will join TransCanada’s existing Alberta network.
TransCanada will also have the right to raise its stake by acquiring up to 50 percent of any portions offered for sale by the four producer companies.
TransCanada chief executive officer Hal Kvisle said in a statement that gas from northern Canada will “help meet anticipated increases in demand and will help keep our existing pipeline facilities full.” Economic self-sufficiency within reach Aboriginal Pipeline Group Chairman Fred Carmichael said the deal “puts the necessary funding in place to go forward with this pipeline project” through an “unprecedented partnership” of aboriginal people and the resource industry.
He said economic self-sufficiency now seems within reach of Canada’s northern natives, ensuring a “great future for our children.”
The agreement reflects a changed aboriginal attitude to the gas project over the last 30 years since community opposition scuttled the first attempt at developing Arctic gas.
Aboriginal Pipeline Group members include groups controlled by the Gwich’in, Inuvialuit, Deh Cho, Sahtu, Akaitcho, Dogrib, Salt River, North Slave Metis Alliance and South Slave Metis Alliance.
K.C. Williams, president and chief executive officer of Imperial Oil Resources — the lead partner in the Delta producers’ consortium — described the deal as a “very significant step forward” by enabling aboriginals to become full partners. TransCanada has delta grip The deal gives TransCanada a tight grip on carrying gas from the delta while still leaving it strongly placed through its joint ownership of Foothills Pipe Lines to participate in the Canadian portion of any overland pipeline from the North Slope to the Lower 48.
But William Lacey, a pipeline analyst with FirstEnergy Capital, told the Financial Post that the terms do not give TransCanada control over where the gas is shipped to.
However, moving gas through the established TransCanada system is expected to lower costs for producers and consumers.
The agreement does provide for the removal of gas liquids at Norman Wells in the central Northwest Territories for shipment through the Enbridge-owned crude oil line to northern Alberta.
The new level of certainty over the delta project should further spur activity in the region by the Mackenzie Delta Explorers Group, comprising EnCana, Petro-Canada, Anadarko Canada, BP Canada Energy, Burlington Resources Canada Energy, Chevron Canada Resources and Devon Canada.
New discoveries by those companies are needed to give them access to the pipeline and support an aboriginal ownership position.
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