First Gas Tapped and Delivered in Canadian Arctic
Canada's Far North was the scene Friday (Sept. 10) of a
natural-gas industry version of the small step for man but giant
leap for mankind on the moon 30 years ago.
An elaborate ceremony in Inuvik, the principal town of the
Mackenzie Delta, inaugurated the first gas production in the
Canadian Arctic. The project is tiny compared to the
multibillion-dollar production and pipeline mammoths that were
envisaged in the 1960s, '70s and early-'80s banner times of
exploration on the Delta and offshore in the Beaufort Sea. But the
development, as well as the ceremony, drew a cast of Canadian
Representatives of the Canadian Association of Petroleum
Producers, Enbridge Inc., Altagas Services, Gulf Canada, Chevron
Canada, Shell Canada, Koch Oil and every government level involved
turned out to praise the Ikhil Gas Project as a breakthrough and
early start on much bigger things.
Ikhil was a C$40-million (US$27-million) exercise in putting two
13-year-old Delta wells on production and building a 30-mile
pipeline to replace diesel fuel at Inuvik's power station and
eventually provide home-heating service to a population of 3,300.
The project started when Inuvaluit Petroleum Corp., an economic
development arm of its namesake aboriginal community, bought the
Ikhil field and its estimated 14 Bcf of reserves from Gulf. It grew
up into a successful trial run at exploiting gas resources in a
physically forbidding and formerly hostile area that CAPP described
as "a showcase of how industry and aboriginal groups can work
together to bring about commercial developments."
While IPC kept the lead role, one-third interests were bought by
Altagas (a leading Alberta "midstream" processing operation) and
Enbridge (a partner in Alliance Pipeline Project, owner of Toronto
distributor Consumers' Gas Co. and a partner in a new gas
distribution franchise awarded by New Brunswick). Gulf and Shell
continue to hold multitrillion-cubic-foot Arctic gas discoveries,
while Chevron is leading an accelerating drilling and development
effort in the southern Northwest Territories.
While the gas companies set no target dates for reviving dormant
plans for a Mackenzie Valley pipeline, all stressed that they want
to be sure they stay in good standing in the north for the day one
comes together. Ikhil also was rated as a productive field trial of
solutions for a major engineering problem awaiting northern
developers, installing buried gas pipeline in permafrost.
There were other signs that interest in Arctic gas development
is reviving. Bidding closed the day before the Inuvik ceremony on
an auction of new Delta drilling rights. The signals also included
a new study of Mackenzie Delta-Beaufort Sea gas by the Calgary arm
of the international energy consulting house of Purvin & Gertz
Inc. for 16 Canadian and U.S.-owned corporate sponsors. The study
reached no startling new conclusions. It repeated previous
forecasts that a large-scale development "could be feasible under a
wide range of plausible circumstances" but that "there are major
challenges" such as the region's remoteness and costs as well as
overall market conditions. Purvin & Gertz estimate that
benchmark Henry Hub prices have to reach US$2.50 per MMBtu and
reliably stay there on a sustained basis to support a major
northern gas development. But on top of strong North American
demand, rising prices for Canadian production and a northern
gas-resource endowment estimated at 64 Tcf, Purvin & Gertz
cited increasing native interest in resource development among
factors favoring a revival of interest in the far north.
Ikhil helped foster a new image of the industry in the region's
ruling native community as a helper rather than a pillager.
Residents of Mackenzie Delta communities got half the project's
construction jobs. Inuvik residents are forecast to save C$20-$25
million (US$13.5-$17 million) over 15 years thanks to the
substitution of gas for diesel fuel imported from Alberta.
The project, whose motto is "From the North, for the North,"
also boasted environmental benefits: a 32% decrease in greenhouse
gas emissions and reduced diesel engine noise. The project
predicted the switch to gas will reduce carbon-dioxide emissions by
12,600 tons per year - an amount that would take 3,000 football
fields of forest to convert into oxygen.
Gordon Jaremko, Calgary