CALGARY— Oil companies behind a $16.2-billion plan to build a gas pipelinefrom the Canadian Arctic expect to restart talks with Ottawa shortlyover financial support in hopes of striking a deal by mid-year, thehead of one of the partners said on Wednesday.
The players havescheduled a conference call for next week to hammer out a timetable forthe discussions, seen as crucial to the Mackenzie pipeline project’ssuccess, said Bob Reid, president of Aboriginal Pipeline Group.
Backersof the long-delayed development won regulatory approval in December andare now awaiting a final nod from the federal cabinet.
"There’s aconference call set up for next week to try and schedule there-engaging, and we want to do that — we want to get back and get thisthing done," Reid told reporters after speaking to a Canadian InstituteArctic gas conference. "It is absolutely urgent from our perspective."
Nowseveral years behind its initial schedule, the Mackenzie project isunder economic pressure due to high construction costs and questionablereturns due to weak gas markets as the industry develops cheaper shalegas reserves across North America.
Reid, whose native-ownedcompany has a one-third stake in the proposal, said the current targetcalls for completion of a fiscal deal by the end of the second quarter.
Thatwould trigger a decision among the partners to restaff the project andresume detailed engineering and field work along the route through theNorthwest Territories, which was suspended in 2007 as the regulatoryprocess stalled.
In its approval, Canada’s National Energy Boardsaid the partners, led by Imperial Oil Ltd and including some of theworld’s largest oil companies, must make a go-ahead decision by late2013.
The line would carry up to 1.2 billion cubic feet of gas toAlberta’s pipeline network from the Mackenzie Delta on the coast of theBeaufort Sea. The current start-up estimate is 2018, although Reidcautioned that any delays in the steps leading up could push that backyet again.
The Northwest Territories government and native groupshave been anxiously awaiting construction of the line, first envisionedin the 1970s, as a way to boost economic activity and create jobs.
Beforesuspending discussions amid the regulatory delay, the Mackenziepartners and federal government tried to hammer out amultibillion-dollar deal to improve the economics.
It wouldinclude such measures as public funding of roads, airstrips and otherinfrastructure in the sparsely populated and largely undeveloped region.
Reidsaid the partners want the federal government to consider loanguarantees, which would cut the hefty cost of capital by improvingratings on the debt. That would allow lower transport tolls.
For the much-larger Alaska pipeline proposal, the U.S. government has committed to US$18-billion in loan guarantees.
"Ifyou take an A rating, which we would get with this collection ofcompanies right now, and improve that to an AAA rating, you couldreduce the toll by US$1.50 (per million British thermal units). That’show sensitive it is. It’s huge," he said.
The backers also want some way to offset the high costs of the six-year regulatory process, Reid said,
The other partners are Royal Dutch Shell Plc, ConocoPhillips and Exxon Mobil Corp.
© Thomson Reuters 2011