Not all of the elements are in place to commercialize the two major proposed Alaskan and Canadian natural gas pipelines, but progress is being made. ExxonMobil Corp. is “awaiting the right conditions for development” because the North American market will need gas from both projects in the next decade, a company executive said Tuesday.

Stuart McGill, Exxon’s senior vice president, spoke at the Goldman Sachs Global Energy Conference 2005 on Tuesday. He said the current focus for the oil major for both projects is to secure “the legislative and fiscal framework needed to move forward.” For the Mackenzie Gas Project, the commercialization effort also includes securing the necessary permits, maintaining the support of the four aboriginal groups across whose land the gas will flow, obtaining federal and territorial government support, and receiving commitments from third-party shippers.

“Key focus for the Alaska project is building on the federal enabling legislation which was recently passed, developing the fiscal contract with the State of Alaska, and assuring a clear regulatory process in Canada,” he said.

At Prudhoe Bay and Point Thompson, McGill noted that gross gas resources are estimated at approximately 30 Tcf, and in the Mackenzie River delta in Canada, the company holds an interest in two of the three fields that together hold more than 6 Tcf, which will form the foundation for the Mackenzie Gas Project.

“It is important to remember that essentially all large projects to commercialize remote gas require fiscal and commercial terms uniquely tailored to the specific project,” he said. “The projects will be massive and complex. The Alaska project will involve nearly 1,700 miles of 52-inch pipe just to the border of Alberta…capable of handling 4-5 Bcf/d. The Mackenzie Valley pipeline will be 800 miles long, with a nominal initial capacity of 1.2 Bcf/d, expandable to 1.9 Bcf/d.

“With costs that could exceed $20 billion for the two projects, we are working on technologies that will contribute to cost reductions and that will help the projects reach fruition,” McGill said.

McGill also talked about the challenges that producers face in developing tight gas reservoirs.

“We have an interest in about 270,000 acres of some of the highest-quality tight gas sands in the U.S., located in the Piceance basin in northwest Colorado,” said McGill. “The ultimate recovery potential of this acreage alone could exceed 35 Tcf. The key to unlocking this and other tight gas is finding a way to move the gas to the wellbore faster, thus increasing the production rate, but without producing undesired formation water.”

McGill said Exxon is taking a “phased approach to development” in the Rockies, and the initial development project, with a production capacity of 55 MMcf/d, is planned to come online in 3Q2005. Subsequent phases could come online every two years thereafter, with capacity reaching up to 1 Bcf/d.

Another challenge that Exxon is tackling is liquefied natural gas (LNG), a market that the producer expects to grow by 2020 to around 20 Bcf. Currently, Exxon participates on a gross basis in about one-sixth of the global LNG trade, and by 2020, it plans to participate in 25-33% of the global market.

“Technology is playing a critical role in this growth in LNG, and ExxonMobil is leading the way,” said McGill. He said with its partner Qatar Petroleum, the company will have reduced the total cost of supplying and delivering LNG to the United States and Europe in 2008 by more than 30%, normalized for liquids contribution, government take, and scope and specification differences.

“This cost reduction — unimaginable in the 1990s — has been made possible by bringing together the people and the organizations that are able to integrate and extend new technologies throughout the entire supply chain.”

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