Arctic Canada gas project moves a step closer
A group of major oil companies moved closer on Monday to embarking on a massive natural gas project in Canada's Arctic by starting work on the regulatory applications needed to develop the fields and build a multibillion-dollar pipeline.
The consortium, led by Imperial Oil Ltd. and now including a company controlled by Northwest Territories native people, has spent the last two years studying the prospect of developing the vast reserves, most discovered in the 1970s.
It could take up to another four years of preparation and C$250 million ($156 million) before the partners decide whether to go ahead with the venture, which would be Canada's first major Arctic gas project, an Imperial spokesman said.
That still likely pushes the group ahead in the epic race against Alaska to tap major northern reserves, analysts said.
The firms want to develop their nearly 6 trillion cubic feet of gas reserves located in the Northwest Territories' Mackenzie Delta region on the coast of the Beaufort Sea. The other partners are Conoco Inc. , Shell Canada Ltd. and Exxon Mobil Corp.
The project - being considered at the same time as a larger and more expensive proposal in Alaska - would include an 800-million-to 1-billion-cubic-feet-a-day pipeline to Alberta along the Mackenzie River valley at an estimated C$3 billion. The gas would be used in Canada and the United States.
In October, the oil firms, known as the Mackenzie Valley Producers Group, signed a landmark agreement with Northwest Territories native leaders that would give the region's aboriginal people a one-third stake in the line and provide opportunities for other economic benefits.
Imperial cautioned that a go-ahead decision depended on several market and social factors and that the regulatory phase of the project could last three to four years, although it hoped for a shorter period.
"This is all the technical, environmental, commercial and consultation work that you need to do to prepare, file and support the regulatory applications for three components - the field, gas gathering and pipeline facilities," spokesman Hart Searle said. "So it's a lot of work."
Over the past two years, there has been much debate in the oil industry about whether Mackenzie Delta or Alaska gas would flow to southern markets first, although it has calmed down as natural gas prices have sagged from last year's record highs.
Assuming the regulatory process, requiring dozens of approvals by federal, provincial and territorial regulators and government agencies, takes as long as estimated, the project could start pumping in 2007 or 2008.
That still gives the Mackenzie Delta the edge over Alaska, where BP Plc , Exxon Mobil and Phillips Petroleum Co. are planning development of their reserves but are mired in cost and regulatory uncertainty, said Wilf Gobert, analyst with Peters & Co. Ltd.
Gobert said the delta gas, at lower volumes than what is planned in Alaska, would also be more easily absorbed into southern markets, especially in Alberta were several new oil sands projects will need large supplies.
Meanwhile, authorities such as the National Energy Board, Canadian Environmental Assessment Agency, Mackenzie Valley Land and Water Board and several others invited public comment on Monday on a co-operation plan to streamline the application process.
The reserves being targeted are harbored in Imperial's three trillion cubic feet Taglu field, the 1.8 trillion cubic feet Parsons Lake field, co-owned by Conoco and Exxon Mobil, and Shell's 1 trillion cubic feet Niglintgak field.
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