MGM Energy Corp MGMCF

Mackenzie Valley Pipeline

[OilEng]

Here is what the NEB says about the pipeline

By the end of 2013 we require the companies to file an updated cost estimate and report on their decision to build the pipeline... Actual construction must begin by the end of 2015 for our approvals to remain valid.

https://www.neb-one.gc.ca/clf-nsi/rthnb/pplctnsbfrthnb/mcknzgsprjct/rfd/rfdv1p4-eng.html#cont

Here is my take on the pipeline. I hope it generates some discussion as I don't know have any answers on this.

1. If Imperial follows the NEB schedule the pipeline could be on-stream by 2017 to 2018??
2. One of the big holdups has been that the consortium wants the Feds to build the Mackenzie Valley Highway. The section to the gas fields in the Delta from Inuvik to Tuk is under construction and the southern section has been under Environmental Assessment for about a year.
3. Construction could start as early as 2016 on the section from Wigley to Norman Wells. That section will not take long to build as it only requires one major bridge across the Great Bear River. The section from Norman Wells to Inuvik is a different matter as there is no highway and they will be starting from scatch. (Ft. Good Hope to the Dempster to the really tough part)
4. The Delta has about 7 Tcf discovered. According to MGM the supply costs is around $6 to $7/mcf. This means that Henry Hub prices have to be that high in order for the project to earn a 10% BIT return.
5. A lot of shale gas is economic at below the Delta supply costs, so I don't know if we are going to see North American gas prices above this by the time the pipeline is built. As a result, LNG is probably the option that Imperial will be looking at for the Delta gas.
6. An LNG plant is a long ways off.
7. The Canol has very roughly the same amount of gas. The difference is that this gas has condensate and is rich in NGL. There is also a lot of oil. Of course this is all dependent on getting some good flow rates, but I am sure - I hestitate to say positive - that the oil and gas is there in billions of barrels. I just don't know how much of it is recoverable.
8. The Mackenzie Valley Pipeline is a gas pipeline and an NGL pipeline. It is actually two pipelines.
9. Imperial has large facilties in Norman Wells which are going to cost hundreds of million of dollars to abandon and reclaim. It would make sense for the Canol to use these facilties.
10. The pipeline consortium is Imperial, Shell and Conoco. You have to beleive that Conoco and Shell are involved in the decision. Although we don't take much about Imperial in the Canol they hold a large acreage position in the condensatae and wet gas windows.

Given these facts, here is my guess:

1. The Mackenzie Valley Pipeline will be built in two sections: AB to Norman Wells and then Norman Wells to the Delta.
2. The first section to Norman Wells will be built according to the NEB schedule with construction starting in 2015. They may ask for a delay until the all-weather road is completed and more testing is done.
3. The section from Norman Wells to the Delta is a long ways off.
4. The existing Enbridge oil pipeline will be converted to NGL's and a new oil pipelilne will be built. I think it makes sense to build it to the tidewater rather than AB. It might end up in Valdez AK I know that Henry said that that option had gotten legs in the last few months.

The pipeline consortium has spend hundreds of millions of dollars on this project and an approved pipelilne project is not something that is going to be walked away from without careful consideration

Lets here your thoughts folks.