MGM Energy Corp MGMCF

RE:NWT hopeful of revamped Mackenzie gas project

[OilEng]

The approval of the export approval for Imperial/Exxon does make the Mackenzie Valley Pipeline interesting.   However, the Delta does not have the reserve base to support such a large project.  The project is 30 Mtpa (millions of tonnes per year) which is equal to almost 4 Bcf/d for 25 years.  (convert Mtpa to Bcf/d by multipling by 0.13) This is means that they need about 35 Tcf over the life of the project.  The Delta has 7-8 proved with more to be discovered, but that is a long ways off of 35 Tcf.  Imperial, Exxon and BP submitted an application to drill in the Arctic Ocean in October, but that project is a long ways off.

So where are they going ot get all this gas?  To put this in perspective, the Exxon/Imperial project is 2x as big as the Gorgon project off Australia which is considered the biggest in the world. 

Logically they are going to go for the cheapest gas first.  The cheapest gas is shale deposits which are rich in condensate and oil because gas is basically a waste product.  (NGL's are nice, but aren't that valuable). 

Imperial acquired Celtic which has large holding in the Duvernay and the Alberta Montney.  (They spun Celtic off to XTO Canada).  That is the logically first choice.  The next choice is the Canol which is primarily a condensate and oil reservoir with many Tcf of associated gas.  The next logical choice is to extend the pipeline to the Delta and take the cheap conventional gas.  The gas is the Delta is much cheaper to develop than dry shale gas ONCE you have a pipeline.  My quess is that Delta gas cost $1/mcf to develop while Dry Shale gas in the Horn River is $3/Mcf. 

This is without considering Shell project at 24 Mtpa and Chevron at 10 Mtpa.  Shell and Chevron have large holding in the Duvernay, Canol and Delta.  These three projects amount to 8.3 Bcf/d or about 75 Tcf.  That is a lot of gas.  Contrary to the expectations of BC, I don't think all that gas will be sourced in B.C.  The reason is simple, the royalties are much higher and the BC Montney (it does have some NGL's)  and Horn River gas doesn't have condensate or oil.    BC royalites are 25% while NWT and AB are 1 to 5%.   BC also has a 7% sales tax while AB and NWT don't have one.  For a $10 million well that is an extra $700,000.

So I think it is 1, 2, 3:  Duvernay, Canol and then the Delta.  The Duvernay needs a pipeline to Prince Rupert, the Canol needs the first half of the MVP from Norman Wells to AB and finally you get the other half of the MVP to the Delta from Norman Wells.  

I doubt if we will get anything too concrete on Friday from Imperial, but who knows.