Sunday 7 September 2014

The return of the Mackenzie Pipeline.

The truly northern northern pipeline route gained some publicity this week as a report from Canatec Associates (an arctic petroleum consultant) that was commissioned by the Albertan government last year and has just been released  (I believe found here).

I had wondered about this possibility back in December (here) after Bill C-15, which grants more control over these types of decisions to the NWT, passed. My belief was that with a strong resource development supporter at the helm, NWT would be much more likely to get pipelines through then BC; all else being equal. Of course, all else isn't equal, and that hasn't changed.

The board is appointed by the federal minister for Northern Affairs. The result is a far more streamlined approvals system that could well usher a new pipeline through in record time.
Following the release of the report, Northwest Territories Premier Bob McLeod said he was “heartened,” and that he’ll be meeting with his counterparts in Alberta to figure out the next steps.  
“We’ve always said that there are significant resources that have been stranded for 40 years and we’re not going to leave them stranded for another 40,” Mr. McLeod told the Financial Post.

I really believe the viability of the NWT assets, particularly the canol shale potential in the Central Mackenzie Valley will be the key to getting Alberta oil to Tuktoyaktuk. No one wants to simply be a transit point. Then again, without the Canol Shale development, the NWT will be in need of revenue.

And there hasn't really been alot of news on the Canol Shale this year. MGM which had explored the north in general and the Canol more specifically, was subsumed by parent company Paramount Resources after alot of money was sunk into the region with no production to show.

Outlined here, MGM president Henry Sykes talks about the region:
“Our experience has not been a positive one. Obviously we’ve spent hundreds of millions of dollars, drilled 11 wells and have nothing really to show for it today in terms of any cash flow-generating ability,” said Sykes, who predicted similar outcomes for other companies. 
“Until there’s infrastructure in the North, until people can see a clear path to investment and return on investment, I think you’re going to find activity is going to be delayed, if not eliminated altogether,” he said.
Sykes go on to state that they were sitting on billions of barrel of oil (I'm assuming that's the play at large and not MGM's holdings). The scale of which would be pretty solid motivation. However, having helmed a failed venture Sykes might be a bit bias on the potential (if only there was access to markets MGM would be kicking ass!).

At the end of the day it's good to get another viable pipeline option. The added length and variability in operating a year round facility that far north will add significantly to cost. However, one might argue that a more favorable political climate may offset that. Hopefully, the Canol will prove viable economically.

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