The Mackenzie Delta Producers Group and the Mackenzie Valley Aboriginal Pipeline Corp. (MVAPC) announced their intent last week to begin preparing regulatory applications leading to the development of the delta’s onshore natural gas resources, including a long-awaited pipeline. As envisioned, the pipe would be anchored by nearly 6 Tcf at the Taglu, Parsons Lake and Niglintgak gas fields, and would be accessible to other existing and future natural gas discoveries in the Mackenzie Delta and Mackenzie Valley regions.

Since initiating a feasibility study into Mackenzie Delta gas development in early 2000, the producers, which include Imperial Oil Resources, Conoco Canada, Shell Canada Ltd. and ExxonMobil Canada, have met with more than 100 parties, including the region’s communities, governments, and oil and gas companies. They noted that as the project moves into a “definition phase,” the stakeholders “will continue to be consulted to ensure their input is represented and considered.”

In October 2001, the producers group and the MVAPC, representing many — but not all — of the aboriginal peoples of the Northwest Territories, signed a memorandum of understanding to guide future work on the economic and timely development of a Mackenzie Valley Pipeline (see NGI, Oct. 22, 2001). The latest announcement, they said, “signals the producers’ intent to move from the feasibility study phase to the project definition phase,” which would include technical, environmental, consultation and commercial work required to “prepare, file and support regulatory applications for field, gas-gathering and pipeline facilities.” Work will also begin to develop benefit plans, access agreements and other arrangements in support of the applications.

“Announcing our intent to proceed with the project definition phase demonstrates the confidence of the producers group and the MVAPC that development of Mackenzie Delta gas, including a Mackenzie Valley Pipeline, is potentially commercial and can be beneficial to the people of the North and to all resource developers,” said K.C. Williams, senior vice-president, Imperial Oil. Because it holds the natural gas rights at Taglu, the largest of the three discovered Mackenzie Delta gas fields, Imperial is the designated operator of the gas gathering and pipeline systems.

“The historic memorandum of understanding signed in October has the support of aboriginal leaders who represent about three-quarters of the aboriginal people of the Northwest Territories,” said Williams. “We remain committed to continuing the dialogue with all aboriginal leaders and communities, independent of whether they have ratified the memorandum of understanding. While we are optimistic, the ultimate decision to build the pipeline can only be made after obtaining regulatory approval, and will be a function of many factors, including natural gas markets, construction costs, and regulatory and fiscal certainty.”

Nellie Cournoyea, chair of the MVAPC, said, “the decision by the MVAPC and the producers group to proceed with the preparation of regulatory applications is a significant step toward a Mackenzie Valley Pipeline. The business partnership negotiated with the producers allows all aboriginal people of the North to participate in and benefit from this opportunity, including parties who have not yet indicated their support.”

Henry Sykes, president of Conoco Canada, added that the groups were pleased with the progress made in the past year. “Moving to the project definition phase is a significant milestone in the development of this opportunity. This is pioneering work and we’re creating new ways of doing business including better ways of partnering with northern communities. We can now start preparing the regulatory applications needed for the development of the Parsons Lake gas discovery, which we operate on behalf of ourselves and ExxonMobil Canada.”

Expenditures required to complete the project definition phase, which includes the preparation and regulatory review of the applications, are estimated at about C$200 million to C$250 million. Timing is dependent on several factors, including the regulatory review process. As part of regulatory application preparation, an environmental impact assessment including plans for environmental protection and subsequent monitoring will be prepared.

The proposed pipeline would start at the outlet of a facility located near Inuvik and extend to pipeline infrastructure in northwestern Alberta, and include intermediate compressor stations. The pipeline is expected to be sized to accommodate the producers’ initial capacity, plus additional supplies from other future discoveries. The estimated proportion of this initial shipping need for each of the producers is Imperial 50%, Conoco 25%, Shell 17% and ExxonMobil 8%. The MVAPC’s target participation ownership in the initial pipeline capacity is one-third and is incremental to the producers’ initial capacity. Pipeline access for additional gas would be provided to other producers at commercial rates and terms that are subject to National Energy Board review and approval.

The scope of this proposed pipeline does not include, and the memorandum does not apply to, a natural gas transportation system that includes Alaska. Gas volumes to support the MVAPC’s share of capacity would be sourced from other existing Mackenzie Delta and Mackenzie Valley discoveries, or from new exploration activity currently under way in these areas.

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