In a sign that the long-awaited Mackenzie Gas Pipeline (MGP) might yet be built, Calgary-based MGM Energy Corp. has agreed to ship 200 MMcf/d on the pipeline backers’ proposed Mackenzie Gathering System (MGS). The agreement also gives MGM the option to own a share of the planned gathering system.

MGM, which spun off from Calgary-based Paramount Resources Ltd. in January, gained entry into the Mackenzie Valley following an agreement with EnCana Corp. to buy its stakes in the Umiak discovery and other NWT assets for C$170 million earlier this year (see Daily GPI, May 10).

MGM’s capacity would be used to transport owned and partnered natural gas production from the Mackenzie Delta region to the proposed Mackenzie Valley pipeline. MGM’s agreement only covers the MGS; it does not include a commitment to ship gas on the MGP. The agreement gives MGM “observer status,” which will allow the company to provide input regarding system design and other issues of the gathering system.

“This agreement enables the natural gas MGM Energy currently owns and for which it is exploring to be delivered to the Mackenzie Valley pipeline on start up, assuming the project proceeds,” said MGM President Henry Sykes. “The execution of a capacity request agreement by MGM Energy provides the project proponents, governments and others, tangible evidence that additional volumes of natural gas are committed to the Mackenzie Gas Project.”

MGM CFO Rich Miller said his company wanted to take the space “while it was available and because it was unregulated.” The agreement to ship gas on the gathering system is “another piece in the puzzle and proves that there are other parties committed to the project.” Miller said MGM’s agreement should prove to the Canadian government that the pipeline would benefit more than just the producers.

Imperial Oil Ltd. spokesman Pius Rolheiser said the agreement is “obviously…a positive step.” Imperial is the lead partner in the consortium of four producers and the Aboriginal Pipeline Group backing the MGP, which would move gas south to U.S. markets.

Although there has been speculation that the MGP and its associated systems would never be built, CEO Rex Tillerson of co-sponsor ExxonMobil Corp, said last month that the MGP had not been shelved, adding, “it’s still being actively worked on.” (see Daily GPI, Sept. 11).

©Copyright 2007Intelligence 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.