Canada Mackenzie natgas pipeline can go ahead – govt panel

31 December 2009 14:48  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s long-delayed Mackenzie Valley natural gas pipeline project can go ahead, subject to a number of recommendations, a government-appointed panel said in its report findings on Thursday.

Canadian petrochemicals producers have been looking to the 1,200km pipeline, and another planned project from Alaska, as a source of long-term additional feedstock. Ethane extracted from the gas shipped on those pipelines could even justify a new cracker in Alberta, industry observers have said.

The Joint Review Panel, which has been reviewing the project’s socio-economic and environmental impacts for a number of years, said the pipeline would have clear economic benefits for Canada, especially for the country’s remote Northwest Territories.

The report noted that the chemical industry was among the beneficiaries, but added that so far none of the Mackenzie proponents – led by Imperial Oil, the Canadian arm of ExxonMobil – have made arrangements to market the gas.

The panel’s report lays down a large number of recommendations to mitigate adverse environmental impacts, including a suspension of construction for five months every year to protect wildlife.

The report will now go to the National Energy Board, a federal energy regulator, which was expected to conduct further hearings before making its recommendation to the government.

The project had been of high interest in the earlier part of the decade when North American natural gas prices soared, but it later stalled amid soaring construction costs and lower gas prices.

ExxonMobil chief executive Rex Tillerson said in 2007 that both the Alaska and the Mackenzie pipelines were not likely to be built in the foreseeable future as they were uneconomical because of high project costs.

The project was previously estimated to cost some Canadian dollar (C$) 7.5bn ($7.1bn), but analysts now put that at over C$16bn.

Meanwhile, observers have warned that chemical producers in Alberta could face a 70,000 bbl/day shortfall in ethane feedstock by 2015 if nothing was being done to increase supplies.

Major chemical firms with production in Canada include NOVA Chemicals, Dow Chemical, Imperial Oil, Shell, MEGlobal, DuPont Canada, LANXESS and Invista, among others.

The detailed two-volume report and an executive summary can be downloaded from the panel’s website.

($1 = C$1.05)

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By: Stefan Baumgarten
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