Canada’s Far North was the scene Friday (Sept. 10) of anatural-gas industry version of the small step for man but giantleap for mankind on the moon 30 years ago.
An elaborate ceremony in Inuvik, the principal town of theMackenzie Delta, inaugurated the first gas production in theCanadian Arctic. The project is tiny compared to themultibillion-dollar production and pipeline mammoths that wereenvisaged in the 1960s, ’70s and early-’80s banner times ofexploration on the Delta and offshore in the Beaufort Sea. But thedevelopment, as well as the ceremony, drew a cast of Canadianstars.
Representatives of the Canadian Association of PetroleumProducers, Enbridge Inc., Altagas Services, Gulf Canada, ChevronCanada, Shell Canada, Koch Oil and every government level involvedturned out to praise the Ikhil Gas Project as a breakthrough andearly start on much bigger things.
Ikhil was a C$40-million (US$27-million) exercise in putting two13-year-old Delta wells on production and building a 30-milepipeline to replace diesel fuel at Inuvik’s power station andeventually provide home-heating service to a population of 3,300.The project started when Inuvaluit Petroleum Corp., an economicdevelopment arm of its namesake aboriginal community, bought theIkhil field and its estimated 14 Bcf of reserves from Gulf. It grewup into a successful trial run at exploiting gas resources in aphysically forbidding and formerly hostile area that CAPP describedas “a showcase of how industry and aboriginal groups can worktogether to bring about commercial developments.”
While IPC kept the lead role, one-third interests were bought byAltagas (a leading Alberta “midstream” processing operation) andEnbridge (a partner in Alliance Pipeline Project, owner of Torontodistributor Consumers’ Gas Co. and a partner in a new gasdistribution franchise awarded by New Brunswick). Gulf and Shellcontinue to hold multitrillion-cubic-foot Arctic gas discoveries,while Chevron is leading an accelerating drilling and developmenteffort in the southern Northwest Territories.
While the gas companies set no target dates for reviving dormantplans for a Mackenzie Valley pipeline, all stressed that they wantto be sure they stay in good standing in the north for the day onecomes together. Ikhil also was rated as a productive field trial ofsolutions for a major engineering problem awaiting northerndevelopers, installing buried gas pipeline in permafrost.
There were other signs that interest in Arctic gas developmentis reviving. Bidding closed the day before the Inuvik ceremony onan auction of new Delta drilling rights. The signals also includeda new study of Mackenzie Delta-Beaufort Sea gas by the Calgary armof the international energy consulting house of Purvin & GertzInc. for 16 Canadian and U.S.-owned corporate sponsors. The studyreached no startling new conclusions. It repeated previousforecasts that a large-scale development “could be feasible under awide range of plausible circumstances” but that “there are majorchallenges” such as the region’s remoteness and costs as well asoverall market conditions. Purvin & Gertz estimate thatbenchmark Henry Hub prices have to reach US$2.50 per MMBtu andreliably stay there on a sustained basis to support a majornorthern gas development. But on top of strong North Americandemand, rising prices for Canadian production and a northerngas-resource endowment estimated at 64 Tcf, Purvin & Gertzcited increasing native interest in resource development amongfactors favoring a revival of interest in the far north.
Ikhil helped foster a new image of the industry in the region’sruling native community as a helper rather than a pillager.Residents of Mackenzie Delta communities got half the project’sconstruction jobs. Inuvik residents are forecast to save C$20-$25million (US$13.5-$17 million) over 15 years thanks to thesubstitution 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 greenhousegas emissions and reduced diesel engine noise. The projectpredicted the switch to gas will reduce carbon-dioxide emissions by12,600 tons per year – an amount that would take 3,000 footballfields of forest to convert into oxygen.
Gordon Jaremko, Calgary
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