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Gold/Mining/Energy : Alaska Natural Gas Pipeline -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (74)	7/7/2005 12:27:35 PM
From: Dennis Roth	Respond to of 570

Exploration firms rap pipeline size. Planned Mackenzie line not big enough. By DAVE EBNER Thursday, July 7, 2005 Page B4 theglobeandmail.com CALGARY -- The latest questions about the proposed $7-billion Mackenzie Valley natural gas pipeline are being asked by players in the oil and gas business itself -- and the questions suggest that Imperial Oil Ltd.'s current plans are partly flawed. In a submission to the National Energy Board, the Mackenzie Explorer Group called the pipeline's design inadequate, arguing that there is more gas in the region than the system as it is currently planned is meant to handle. The group members, which include Devon Energy Corp. and Chevron Corp.'s Canadian arm, are active in the Northwest Territories but doesn't have an ownership stake in the proposed pipeline. The explorers' group is also demanding that the pipeline's backers, led by Imperial, reduce the proposed rates to ship gas on the line, claiming that Imperial is exercising unfair market power. In a study for the explorers by Calgary engineering firm Sproule Associates Ltd., it was shown that there is a "high probability" that a bigger pipeline will be necessary. The study concluded there could be about 46 trillion cubic feet of undiscovered gas in the Mackenzie Delta and Beaufort Sea, enough to fuel gas-heated homes in Canada for almost a half century. The estimate is more than four times higher than the total submitted by Gilbert Laustsen Jung Associates Ltd. for Imperial. Sproule admitted that it was looking at the total potential for the region, whereas Gilbert Laustsen Jung focused on confirming that Imperial and its partners have enough discovered gas to justify a pipeline. At present, the main backers of the pipeline -- Imperial, ConocoPhillips Canada and Shell Canada Ltd. -- are sitting on about six trillion cubic feet of gas onshore, of which about half belongs to Imperial. Devon is drilling a $60-million well in the Beaufort Sea this December, the first effort there since the late 1980s. John Richels, president of Oklahoma City-based Devon, said yesterday that the company is hunting for targets that might contain several trillion cubic feet of gas. While the explorers have questions, the group is not trying to stop the pipeline. "We're not there to block the project," said Michel Scott, a Devon Canada vice-president. "We're trying to get on the same page. . . . We would like to see a system that has some flexibility to accommodate future discoveries." Devon's main worry is the capacity of the so-called gas gathering system in the Mackenzie Delta, which would help connect Devon's gas to the main pipeline. The Sproule report showed that the capacity of the main pipeline could be an issue, as Sproule's numbers suggest there might be enough gas to support a pipeline with capacity of at least 2.5 billion cubic feet a day. The current plan is to start at 1.2 billion cubic feet with a possible expansion to 1.8 billion. Imperial spokesman Hart Searle said the company is trying to strike a balance. "If you size it too big and the gas isn't there, the cost of service goes way up." On proposed tolls, Mr. Searle said it is a normal to debate such an issue. "The regulatory process is by its nature adversarial." The new questions are only the latest challenge to the pipeline plan. Imperial in April halted most work on the line, citing slow regulatory progress and what it called unreasonable financial demands from northerners. The federal government and the Northwest Territories are trying to address that with additional funding from Ottawa.