TransCanada PipeLines Ltd. and three industry partners have launched a new era for northern energy development through a ground-breaking deal with an aboriginal group to help fund the latter’s portion of a $5-billion arctic natural gas pipeline.
The long-awaited deal, announced last week by Imperial Oil Resources on behalf of the Mackenzie Gas Project proponents, is a significant step toward bringing arctic gas from the Mackenzie River delta to southern Canada along a 1,300-kilometre line.
With regulatory and right-of-way approvals, followed by a potential decision to construct, gas production in excess of 800 million cubic feet a day could begin as early as 2008.
“Natural gas from northern Canada will help meet anticipated increases in demand and will help keep our existing pipeline facilities full, which is good for both shippers and users of natural gas,” said TransCanada CEO Hal Kvisle.
TransCanada will link its Alberta pipeline system to connect with a Mackenzie Valley Pipeline just south of the Alberta-Northwest Territories border. Natural gas liquids produced as part of the project will connect with the existing Norman Wells liquids pipeline to Zama, Alta.
The framework to move forward was hailed by the Inuvik-based Aboriginal Pipeline Group (APG) as an “unprecedented partnership” between the Aboriginal population and industry players, which include Imperial, ConocoPhillips Canada, Shell Canada and ExxonMobil Canada.
The APG, which represents native bands including the Dogrib, Gwich’in, Deh Cho and North and South Slave Metis Alliance, was formed in 2000 to represent the ownership interest of Aboriginal Peoples of the Northwest Territories in the proposed pipeline.
Under the deal, TransCanada will loan APG $80 million toward a feasibility study. APG needed the loan, which will be paid out from its share of pipeline revenues, to participate in the project definition phase. The loan doesn’t have to be repaid if the project fails to go forward.
APG chair Fred Carmichael said the terms of the agreements strengthen the position of northern Aboriginal Peoples in the pipeline project. More than 2,000 jobs are expected to be created during the pipeline’s construction.
“These agreements address APG financing, enhance the rights of the APG as defined in the 2001 Memorandum of Understanding and chart a course for the project to move forward in a way that will create real and lasting benefits for the people of the North,” Carmichael said.
The funds may also be used by the APG to support its share of the construction costs. The level of construction funding required by the APG before start-up will be tied to firm shipping commitments.
The Preliminary Information Package (PIP), a key step in the approval process for the nearly $5-billion Mackenzie project, has been submitted to regulators, which include boards, committees and agencies responsible for assessing and governing energy developments in the Northwest Territories. The information includes preliminary data on environmental studies, public communication and consultation, the proposed pipeline route, size and capacity ranges, and developments for the Taglu, Parsons Lake and Niglintgak fields.
“This is a very significant step forward for the Mackenzie Gas Project. The commercial agreements reached are a win for all parties and conclude a lengthy, but constructive process,” said Imperial Oil Resources CEO K.C. Williams, who signed the agreement in Inuvik last week. “These agreements enable the APG to become a full participant in the Mackenzie Valley Pipeline, and allow the project proponents to move forward with submitting the PIP and advancing other work required to support preparation and filing of regulatory applications.”
The agreement gives TransCanada an option to buy five per cent of the oil companies’ share of the pipeline. If any of the producer group companies sells or reduces its ownership interest in the pipeline, TransCanada will have the opportunity to acquire 50 per cent of any such opportunities, with the APG and other owners sharing in the opportunity to obtain the remaining 50 per cent.
Imperial is the operator of the gas gathering and pipeline systems for the project. Imperial, ConocoPhillips and Shell will operate the three fields, while TransCanada is the pipeline builder on the project.
