Canada’s Mackenzie natgas start-up not before 2018

18 March 2010 16:23  [Source: ICIS news]

TORONTO (ICIS news)--Canada’s long-delayed 1,200km (744 mile) Mackenzie Valley natural gas pipeline project will not start up before 2018 at the very earliest, the company leading the project said on Thursday.

The project's proponents expected to make a final decision in 2013 on whether to go ahead, Imperial Oil's public affairs advisor Pius Rolheiser told ICIS news. Imperial Oil is the Canadian affiliate of US energy and petrochemicals major ExxonMobil.

In 2007, Imperial had estimated that 2014 would be the earliest start-up date. However, the regulatory process was taking much longer than anticipated, Rolheiser said.

However, even with rising natural gas production in North America, the Mackenzie project still had an important long-term role in energy markets, he said.

Canadian petrochemicals producers have been looking to Mackenzie, and another planned project from Alaska, as a source of long-term additional feedstock to expand existing and build new chemical capacities. Ethane extracted from the gas shipped on those pipelines could even justify a new cracker in the country’s Alberta province, industry observers have said.

Rolheiser said the revised start-up timing was due to regulatory delays, lack of a fiscal agreement with the government on taxes and royalties and project staffing, among other factors.

“We filed our regulatory application way back in October of 2004, and here we are, in 2010, and we are still waiting for a regulatory decision,” he said.

Imperial now expects Canada’s national energy regulator to make a decision later this year, he said.

However, that would be a decision only on whether or not the project was in the public interest.

For the pipeline then to be built, Imperial would require hundreds, if not thousands, of specific construction and engineering permits, Rolheiser said. “Every single piece of infrastructure that we need to put in requires permits,” he said.

But Rolheiser stressed that even with rising natural gas production in North America, in particular from US shale gas, there was still a role for Mackenzie.

He pointed to an updated consultant’s study this week that projected rising consumption of natural gas in North America, in particular from industrial users. The chemical industry consumes about 40% of the gas used by industry.

“The Mackenzie gas project remains a potential significant vital supply source for gas for the longer term in North America,” he said.

The pipeline would, if realised, have a capacity to ship 1.2bn cubic feet of gas/day to markets in Canada and the US. With additional compression, capacity could be expanded to 1.8bn cubic feet/day, Rolheiser said.

The pipeline would be fed by three “anchor fields”, but would have the capacity to accommodate future gas discoveries, he said.

The project costs had been estimated at Canadian dollar (C$) 16.2bn ($16.2bn) in 2007. That estimate has not been updated since.

Canadian industry observers have said 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.

Earlier this week, NOVA Chemicals chief executive Randy Woelfel warned that the growth of US natural gas capacity could make gas production in Canada less economical, which in turn could lead to a feedstock shortage for Canadian petrochemicals producers.

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

($1 = C$1.00)

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By: Stefan Baumgarten
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