Conoco Inc. stepped forward this week to help lead Canada in the northern pipeline race, with CEO Archie Dunham paying a call on Calgary as his company takes possession of Gulf Canada Resources Inc. Three weeks after the C$9.8 billion (US$6.3 billion) takeover deal won Canadian government approval and closed on stock exchanges, Dunham declared bringing Mackenzie Delta gas to market to be Conoco’s “number one priority,” and said “the market needs it so we need to strike while the timing is good.”

Gulf Canada ranked second only to Exxon Mobil’s 70%-owned Imperial Oil as an owner of gas properties in the Canadian Arctic. At last count, Conoco’s newly-acquired Canadian assets included 4.2 Tcf of gas reserves in the Delta-Beaufort Sea region, plus extensive holdings of undeveloped drilling prospects. However, the northern reserves do not figure formally on the Canadian companies’ books because they are beyond economic reach in the absence of a pipeline. The last count was in 1989, when the National Energy Board granted Gulf, Imperial and Shell Canada an export license for 10.4 Tcf of Delta-Beaufort reserves. At the time, the NEB’s count was Imperial 5.1 Tcf, Gulf 4.2 Tcf and Shell 1.1 Tcf.

The license expired last year, but not the policy underlying it. The ruling was an early test of Canada’s commitment to energy free trade, following a 1987 decision to end a decades-old practice of holding up to a 30-year supply for domestic consumers off the international market. The 1989 ruling still stands in spirit as a declaration that the Arctic supplies are considered surplus to Canadian needs and available for long-term export commitments. Under current NEB policy, Canadian consumers could only change that view by proving they cannot obtain supplies on comparable terms with U.S. buyers.

Dunham vowed to go to bat for a pipeline link to the Canadian Arctic in Washington, DC, where he said he has the connections to make the case heard. “I’m personally a big supporter of President Bush and I’m a good friend of Vice President Cheney, and we’re going to use those relationships to try to accelerate the pipeline schedule.”

Conoco wants to see the time needed to reach the construction stage accelerated by two years. The company’s vision calls for ground to be broken within four to six years, rather than the six to eight that most Canadians have lately seen as necessary. Said Dunham, “I think this is going to be a political issue to be settled politically. The producers will be very supportive and I think we are going to be able to put together a project that is good for Alaska, good for the United States, good for Alberta, good for Canada, good for the environment and good for aboriginal peoples,” he said.

Conoco Canada’s newly-appointed president, Henry Sykes, said that north of the border, “I think at some point the federal government is going to have to come on board and say Canada is best served by a pipeline down the Mackenzie Delta and by Canadian reserves.”

While Dunham said he could see the day when pipeline connections to Alaskan as well as Canadian Arctic gas will be needed, but the day is not coming soon enough to build both routes simultaneously. He also suggested that no potential route is dead, including the contested “over-the-top” proposal for a line on the floor of the Beaufort Sea to connect Alaskan and Canadian supplies.

Dunham, echoing Canadian counterparts including Anderson Exploration founder J.C. Anderson, described this summer’s retreat by gas prices into the range of US$3/MMBtu as a passing market adjustment that does not eliminate the known need for long-term additions to North American supplies. Conoco also set its sights on owning an interest in a northern pipeline that reflects its share in reserves and production, in order to protect its interests when transportation services and rates are established.

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