TransCanada and Exxon teaming up on Alaska a "wake-up" call for Mackenzie: APG
By: Lauren Krugel, THE CANADIAN PRESS
CALGARY - TransCanada Corp. (TSX:TRP) and ExxonMobil Corp.'s (NYSE:XOM) collaboration on a US$26-billion natural gas pipeline in Alaska is a "wake-up call" for a stagnant project in the Northwest Territories, a backer of the Mackenzie Gas Project said Friday.
"They're gaining on us by leaps and bounds here," said Fred Carmichael, chairman of the Aboriginal Pipeline Group, which holds a one-third ownership stake in the Mackenzie Project.
"That announcement should serve as a wake-up call for the Mackenzie project."
Calgary-based TransCanada and the world's largest publicly-traded energy company teamed up Thursday on the 2,760-kilometre pipeline, which will carry gas from Alaska's North Slope into markets in the lower 48 U.S. states.
Getting the support of ExxonMobil, which controls the most North Slope reserves, was a key step for TransCanada, which until Thursday had not received the backing of any of the major Alaska producers.
TransCanada is involved in Mackenzie through its investment in the APG, and ExxonMobil has a majority stake in lead Mackenzie partner Imperial Oil Ltd. (TSX:IMO)
Both firms have said they are committed to moving both Arctic pipelines forward.
The C$16.2-billion, 1,220-kilometre Mackenzie pipeline has been bogged down by regulatory delays and cost overruns since it was first proposed in 2004.
A panel examining the environmental and socio-economic effects on the pipeline is expected to hand down its report in December of this year - about two years later than expected.
Carmichael said he wants to see Ottawa take a stronger role in moving Mackenzie forward.
For instance, discussions are taking place in Washington about boosting government loan guarantees for Alaska from US$18 billion to US$30 billion.
"The American government has clearly made the Alaska project a very high priority," he said.
"I'm urging our government to step up to the plate and show that the North is important to them."
Earlier this year, Environment Minister Jim Prentice said Ottawa had offered the Mackenzie partners financial support for their project.
"The government of Canada tabled a position. We then heard back from the proponents with a counter position. We are now into detailed discussions about how we go forward," Prentice said in an interview Thursday.
The pipeline would bring a much-needed economic boost to communities along the pipeline's route, Northwest Territories Energy Minister Bob McLeod said.
"For the Northwest Territories we see it as a basin-opening project. Once the pipeline is approved, I expect that we'll see a significant increase in exploration activity," he said.
And it couldn't just help the North. Ontario's steel industry and Alberta's oilfield services industry could also reap billions from the Mackenzie development, McLeod said.
"The Mackenzie project is an opportunity for Canada to lose," he said.
Alaska seems to be "solidly ahead" of Mackenzie as an option for moving Arctic gas south, wrote Desjardins Securities analyst Pierre Lacroix in a note to clients Friday.
"Should an Alaskan project proceed through a successful binding open season, we would not expect there to be sufficient shipper interest in a (Mackenzie Valley Pipeline) project, given that the economic case would likely be weakened significantly."
But Edward Kallio, manager of gas consulting for Ziff Energy Group, said Friday both pipelines will be needed to quench North America's thirst for energy in a decade.
Mackenzie is currently set to come on stream in 2014, and Alaska is slated for 2018.
"Our demand just keeps increasing year by year. We're going to be going from roughly 70 (billion cubic feet) a day now to just over 87 bcf a day by 2020. We'll need the gas," Kallio said.
Huge growth in shale gas plays in the continental United States, as well as imports of liquefied natural gas from abroad will also be needed, with coal-fired electricity production losing favour and demand for natural gas from the oilsands expected to triple by 2020, Kallio added.
If Mackenzie does not get build before the larger Alaska pipeline, its prospects for getting built at all are "severely reduced," said Doug Matthews, an energy consultant in Calgary who used to head up the Northwest Territories' natural resources division.
"That was always the concern. If the Alaskans got a head start it would be very difficult for Mackenzie," he said.
Alaska would ship about 4.5 billion cubic feet a day of gas, whereas Mackenzie would carry one billion cubic feet a day.
The North American market may very well need more natural gas than Alaska's capacity in the future, Matthews said.
But it's cheaper and easier to increase the daily output from Alaska by adding compression stations along the route than to build another pipeline from scratch.