Imperial Expects Canadian-Only Pipe Proposal By End Of Year

With talks still under way between producers and aboriginal peoples in Canada's far north, Imperial Oil Ltd.'s investor relations manager J.C. Cote said Thursday that by the end of this year the producer group is expected to announce plans for a single natural gas pipeline from the Mackenzie Delta to Norman Sands to carry Canadian gas only. Cote, who was in Toronto to speak at the Canadian Oil & Gas Conference sponsored by Peters & Co. Ltd., also said that Imperial's natural gas production, which up to now has been entrenched in Western Canada, surprisingly will be paralleled on the East Coast in Sable Island in the future.

Imperial, the largest integrated oil company in Canada, is 70%-owned by Exxon Mobil, and it also owns a 36.8% share of Alaska's North Slope reserves. With no mention of an Alaskan pipe to the Mackenzie Delta, Cote said that the Canadian producer group, composed of Imperial, Gulf Canada Resources Ltd., Shell Canada Ltd. and Exxon Mobil Canada, is finalizing a proposal for a Canadian-only natural gas line. The producers began their feasibility study last year (see NGI, Dec. 18, 2000), and are still in discussions with the Aboriginal Pipeline Group, which consists of more than 30 aboriginal leaders from the Northwest Territories.

"There are technical and economic challenges" involved in building a gas line, Cote said, but the "social" challenges loom as large, which involve aboriginal interests. "Some leaders wanted more time to review the terms of the memorandum of understanding, and the producer group has said at the onset, it wanted the support of the aboriginal people."

Imperial is the largest acreage holder in the Mackenzie Delta, with estimated reserves on the delta and in shallow waters of the Beaufort Sea of 5.1 Tcf -- about half the supplies discovered so far by the Canadian industry. Cote said the single pipe plan holds the best promise because of the centralized facilities, use of existing rights-of-way already in place and common corridors.

However, Imperial does not plan to pin all of its future on what Cote called the "large, steady gas reserves" found in the Mackenzie Delta. In fact, Cote said that the company is focusing more attention on the East Coast's Sable Island region, where it holds about 9% of the lease area.

"In our natural gas business...until now, we have focused on western Canada, but we now believe our gas business has a great future tied to the East Coast and far north," Cote said.

In 1999, the company obtained exploration rights to eight offshore leases, six in shallow water, covering a quarter million hectares. In joint ventures with Exxon Mobil and Shell Canada, Imperial has made a commitment of C$192 million so far, with plans in place to complete work on the blocks. It also has obtained a 16% interest in other leases, with a work commitment of C$15.5 million.

"We see this region as having significant growth potential for Imperial," Cote said. Of the three largest natural gas discoveries in the Sable Island area -- Taglu, with an estimated 3 Tcf in reserves; Parsons Lake, with an estimated 1.8 Tcf in reserves; and Niglintgak, with 1 Tcf of reserves -- Imperial holds 100% interest in the Taglu. Production in the region now is about 500 MMcf/d, a figure Cote said Imperial expects to maintain.

In the near term, Imperial's growth will come from infrastructure growth on the East Coast, with the Mackenzie Delta production remaining steady. While the company's conventional oil growth is lower this year, Cote said oil sands are up, and he sees the company having a "superior resource base, with upstream growth opportunities."

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