ConocoPhillips, a partner in the long-planned C$16.2 billion Mackenzie Gas Project (MGP), said Friday the co-venturers have suspended funding because of “a continued decline in market conditions and the lack of acceptable commercial terms.”

The massive gas project, which in some form has been on the drawing board for decades, would run 1,196 kilometers (743 miles) from the Mackenzie Valley of the Northwest Territories south to connect Canada’s Arctic gas fields to established markets in North America.

ConocoPhillips disclosed the news in an interim update on 1Q2012 performance. The Houston-based producer, which has been involved in developing the pipeline and gathering system, has a 75% stake in the Parsons Lake natural gas field, one of the primary fields in the Mackenzie Delta, and is an anchor shipper for the pipeline development.

There were other signs last week that the project might be in trouble. Stakeholder Aboriginal Pipeline Group (APG), which represents the interests of the aboriginal peoples of the NWT, and which would have the opportunity to acquire up to a one-third interest in the MGP, last week said it was downsizing its activities (see Daily GPI, April 4).

Last month Imperial Oil Ltd. CEO Bruce March, who has led the effort to build the MGP, said he wasn’t ready to throw in the towel despite the slump in prices and pressure from shale gas resources. During an investor presentation in March he said the partners in the dormant gasline project remained “hopeful” of building the proposed 1.2 Bcf/d pipeline.

“It’s fair to say that developments in North American natural gas, certainly, are understood and there are lessons learned there and it certainly factors in our thinking going forward,” said March. “It is not so much what the gas price is today, it is really what it would be from 2018 to 2020. Our company predicts the demand for natural gas in North America will grow significantly and even around the world.”

Shell Canada Ltd. also is a partner in the project. While not an operating partner in the project, ExxonMobil Corp. owns 70% of Imperial and owns a 25% stake in ConocoPhillips’ Parsons Lake gas field.

Based on the suspended funding, ConocoPhillips expects to record a noncash impairment on the MGP project costs of about $525 million after taxes in 1Q2012.

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.