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ExxonMobil/Imperial puts Arctic gas ambitions on full display Fast-track approval for Mackenzie Delta pipeline could open way for over-the-top Alaska route; ArctiGas says ‘evidence’ points in that direction Gary Park PNA Canadian Correspondent
The word doing the rounds in Canadian oil patch circles is that Exxon Mobil Corp. and its Canadian affiliates have made a pre-emptive strike and seized control of the Arctic natural gas agenda.
From its position of strength as the dominant gas owner in the North Slope and Mackenzie Delta, the Irving, Texas, energy giant has apparently decided that the Delta project will proceed first.
Nominally, that decision has been made by Imperial Oil Ltd., its sister company, ExxonMobil Canada, and their Delta partners, Shell Canada Ltd. and Conoco Canada Ltd.
But the realities of decision-making are inescapable. Imperial (which owns 50 percent of the 5.8 trillion cubic feet of the Delta’s three largest onshore discoveries) is 69.6 percent owned by ExxonMobil and ExxonMobil Canada (an 8 percent owner of the Delta’s known reserves) is wholly owned by ExxonMobil.
Add to that equation ExxonMobil’s own 40 percent share of the North Slope reserves and you have a potent combination.
Where does North Slope fit? From the revival of the Arctic debate almost three years ago, the common wisdom in Canada has been that ExxonMobil would use its clout in any way it chose to determine when North Slope and Mackenzie Delta gas would come on stream and by what route that gas would be delivered to market.
With Imperial going public Sept. 10 with its intention to pursue fast-track approval for the Delta, the bigger question becomes: Where does the North Slope now fit in the scheme of things?
One theory that is popular among observers and analysts has ExxonMobil using the Mackenzie Delta project as leverage for the North Slope, giving fresh life to the much-disparaged over-the-top, or northern route.
It unfolds like this: Once the approvals are in place for a Mackenzie Valley pipeline, ExxonMobil will revive the case for a connection from the North Slope to the Delta, including an estimated 180 miles of pipeline under the shallow waters of the Beaufort.
On the plus side, the argument runs, such a route could be completed for much less than the combined estimated cost of US$22 billion to build separate systems along the Alaska Highway and Mackenzie Valley; it would take advantage of existing infrastructure and permits in Canada; and it could be accomplished without massive infusions of government loan guarantees or tax credits.
The negatives remain the same: Inflexible opposition from the Alaska and Yukon governments and environmentalists, although the concept does have some support from aboriginal groups in the Norman Wells area of the central Northwest Territories, enticed by the offer of 100 percent aboriginal ownership of the pipeline.
The thought of new hope for the northern route proposal generates undisguised delight from Harvie Andre, chairman of ArctiGas Resources Corp. (the Canadian subsidiary of Houston-based Arctic Resources Corp.), which earlier this year filed preliminary information with Canadian regulators as a first step towards obtaining permits for construction of a US$7.8 billion, 1,600-mile pipeline.
“The evidence keeps piling up that that’s (ExxonMobil’s) plan,” he told Canada’s National Post newspaper.
Imperial pulling out stops Neither ExxonMobil nor Imperial president and chief executive officer Tim Hearn is getting drawn into that speculation.
The nearest hint offered by Hearn on Sept. 10 was contained in his comment: “I believe ultimately market forces will prevail in this whole process.
“There is no reason why Alaska gas shouldn’t come to market, but I think if you look at the proposal for our project, which builds on a lot of the existing infrastructure and is of the size and nature that would be amenable to the marketplace, it just seems that the project should go ahead now.
“That is why we are trying to push ahead and we think the window is appropriate,” he said.
But there is no doubt that Imperial is pulling out all the stops to get the Mackenzie Delta project before regulators. In Hearn’s words: “I’d like you to know that every effort is being made to advance this project as quickly as possible,” he told a Peters & Co. energy investment conference in Toronto Sept. 10.
Setting 2007 as a start-up date allows no room for delays in the daunting task of dealing with 13 regulatory agencies in Canada and obtaining about 300 permits.
Imperial, with Hearn noting that the government has been “stellar” in working with the Delta producers’ consortium, hopes it can work through that maze in 24 to 30 months and Natural Resources Minister Herb Dhaliwal has signaled his belief that such a target is “realistic.”
2007 too aggressive? Others think Imperial is reaching high.
Roland George, a principal with oil and gas consultant Purvin & Gertz Inc. said 2007 is “as aggressive a timeline as I’ve ever heard” and is contingent on no serious roadblocks emerging.
Kevin O’Reilly, research director for the Canadian Arctic Resources Committee, described the 2007 target as enormously optimistic, given the “plethora” of boards and agencies who will be involved in reviewing the proposal.
Aside from mandated federal legislation, there are “constitutionally entrenched provisions of (aboriginal) land claims agreements ... (and) there’s no way to get around them.”
O’Reilly said it would take three to four years to complete the regulatory process, still leaving the construction phase, which has been calculated at a minimum three years.
Even Northwest Territories Resources Minister Jim Antoine was careful to note that fast-tracking would require the full co-operation of many interested parties in the Northwest Territories.
But Antoine welcomed the signal from Imperial, saying that Canada’s largest integrated oil company appeared “more firmly committed now than ever to build a Mackenzie Valley stand-alone natural gas pipeline.”
Signals in waves In fact, the signals have been coming in waves this summer.
In late June, the Delta producers held a non-binding open season to assess the interest level from all Delta E&P companies in obtaining space on a Mackenzie Valley pipeline. Excluding the lead consortium’s four members, expressions of interest were registered by 16 companies and Imperial is now engaged in a follow-up phase to get a more reliable reading on the total volumes nominated.
Last month, it emerged that the Delta producers had moved things up another notch, giving pipeline companies until mid-September to submit ideas and concepts hat could add value to the regulatory applications.
Industry sources say Enbridge Inc., TransCanada PipeLines Ltd. and Duke Energy Corp. through its Canadian subsidiary found themselves at full stretch to meet the deadline, although all three have declared their strong desire to take ownership and/or operator roles in such a project.
Given the fast pace of events, and with the ExxonMobil-Imperial powerhouse apparently so resolutely at the controls, this is no time to doze off.
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