Imperial to tap northern gas

Photo: Contributed

Imperial Oil is hanging on to hope that its long-dormant plan to tap into natural gas fields in the Far North may eventually come to fruition.

The lead partner in the Mackenzie Gas Project has written to the National Energy Board seeking a seven-year extension to a sunset clause attached to federal regulatory approval granted in 2011.

The clause requires Imperial and its partners to break ground on the project by the end of this year. But that's not feasible in today's market environment, with natural gas prices about half what they were when the regulatory application was first filed in 2004.

The request was made in a letter to the NEB penned by Imperial (TSX:IMO) senior vice-president Bart Cahir. Attached is an updated project schedule that would see production begin in 2022 and wrap up in 2026.

Other than timing, Cahir said Imperial doesn't "envision any material changes" to the multibillion-dollar project, which would carry natural gas from three fields near the coast of the Beaufort Sea down the Mackenzie Valley through a 1,200-kilometre pipeline.

However, the possibility has been raised of converting the Mackenzie gas into a liquid state, enabling it to be exported by sea as liquefied natural gas, or LNG. Imperial and its U.S. parent, ExxonMobil Corp., are considering an LNG project near Prince Rupert, B.C.

Imperial's filing to the NEB includes letters of support from the Northwest Territories government and aboriginal groups that back the project.

"It is a precedent-setting project as it is the first in Canada (perhaps globally) where aboriginal people have significant ownership and meaningful participation in a venture of this kind," wrote Nellie Cournoyea, chair and CEO of the Inuvialuit Regional Corporation.

Imperial told the NEB "significant monetary and human resources" have been invested in the project.

"With an extension of the Sunset Clause, this effort will be retained and not be lost. The cost and time required to start over would be a significant deterrent to future development of resources in the Mackenzie Delta and in the Mackenzie Valley," it said.

"In conclusion, the MGP proponents continue to believe that, despite current natural gas market-driven delays, the approved basin-opening project remains in the interest of Northerners and Canadians."

As of late 2013, the entire project was projected to cost at least $20 billion.

In June, Imperial and its partners deferred plans to explore for oil in the Beaufort Sea, saying they needed more time to study how to safely drill offshore wells in the harsh Arctic environment. They asked the federal government for a seven-year extension to their licence, which expires in 2020.