Mackenzie Gas Project newcomers challenge senior firms' plans
Industry duel became public when participants met June deadlines for filing written evidence
Gordon Jaremko
The Edmonton Journal
June 20, 2005
canada.com
A new conflict is erupting over the $7-billion Mackenzie Gas Project -- this time between rival industry factions.
Appeals are being made to the National Energy Board for regulation to ensure the Northwest Territories is open to all natural gas developers.
The project belongs to elder sisters of northern drilling that own Mackenzie Delta discoveries with pedigrees dating back 30 years or more: Imperial Oil, ExxonMobil Canada, Shell Canada and ConocoPhillips Canada (formerly Gulf).
The senior firms' plans are being challenged by relative newcomers to exploration on the Delta and along the Mackenzie Valley. Companies fighting for open gas fields and pipelines include Mosbacher Operating Ltd., a drilling partnership of Apache Canada and Paramount Resources, and the Mackenzie Explorers Group of Anadarko Canada, BP Canada, Chevron Canada, Devon Canada, EnCana Corp., Nytis Exploration and Petro-Canada.
After months of preliminary fencing in private, the industry duel became public as participants in the project's regulatory review met June deadlines for filing written evidence with the NEB. Board proceedings and northern environmental scrutiny continued after the project sponsors suspended field work in April to seek aboriginal land access and benefits agreements. Dates for oral hearings, the last step in the process, remain uncertain.
Mosbacher told the NEB the project sponsors "have utterly failed to present plans that would optimize production of the underlying resource, minimize the ultimate (environmental) disturbance or respect the rightful economic interests of adjacent lands."
The Delta production scheme takes a step backward to the "rule of capture," Mosbacher said. The firm was referring to a first-come, first-grab law of the jungle in the industry's pioneer era. Regulators and business leaders who saw more to be gained from orderly growth ended the dog-eat-dog approach decades ago in Alberta and offshore of the East Coast.
Mosbacher says production plans for two of the Mackenzie project's three Delta anchor fields would drain gas from its holdings, which are geographically and geologically connected.
To protect itself, the firm says it would have to embark on hasty, potentially wasteful development or else take defensive action such as drilling new wells to seal off its reserves that cost $30 million each on the Delta.
Mosbacher urges the NEB to devise a northern counterpart to Alberta conservation regulation. The Alberta system -- created, tested and ultimately victorious against the rule of capture in epic 1930s political and courtroom battles -- takes a co-operative approach.
Key features include "unitization," which requires majority and minority owners of gas pools to work out development and revenue sharing contracts.
The seven-company explorers group seeks cuts in shipping tolls planned for the proposed Mackenzie Valley Pipeline and an ethics code to ensure all gas developers have equal access to delivery service. About $315 million in added facilities are also requested by the group, to give the pipeline built-in capacity for extra expansion beyond the needs of the Mackenzie project's owners.
A forecast done for the explorers group by the geology and engineering consulting house of Sproule Associates suggests the project owners badly underestimate northern resource potential.
The study calculates 56.4 trillion cubic feet of gas awaits new drilling in the Delta-Beaufort Sea region, or quadruple the official Mackenzie project estimate. The Sproule forecast says the area could sustain daily production of up to three billion cubic feet per day, or nearly double the maximum 1.8 billion anticipated by the current design.
Apache and Paramount, in also appealing for improved access to the proposed Mackenzie pipeline and a favourable regulatory regime for independent firms, show big plans are riding on the northern project.
The pair disclosed that over the past three years they spent about $140 million on a 10-well exploration program in a central Mackenzie Valley area known as Colville Hills. Connecting the resulting discoveries to the proposed pipeline will require up to $650 million in production, processing and transportation facilities, the partners say.
Natural gas is turning in a stellar performance, show international trade scorecards kept by the National Energy Board. Both volumes and prices of exports to the U.S., which take about 60 per cent of Canadian production, increased during the last heating season.
Deliveries during November through February rose by 8.5 per cent to 1.3 trillion cubic feet from 1.2 trillion in the comparable period of 2003-04.
The average 2004-05 heating season price fetched by exports climbed 24 per cent to $6.44 US per thousand cubic feet last winter from $5.21 the winter before.
Winter gas export revenues shot up by 34 per cent to $8.65 billion US in 2004-05 from $6.45 billion for the 2003-04 heating season.
gjaremko@thejournal.canwest.com
© The Edmonton Journal 2005 |
