Northern Pipelines - On Hold

Low gas prices can't support Arctic gas pipelines:

First the Mackenzie Pipeline (Calgary Herald link) and quote:

CALGARY - Partners in the proposed Mackenzie Valley pipeline have put the $16.2-billion project on hold, slashing budgets and eliminating staff in response to continued poor price outlooks and lack of commercial support.
Imperial Oil, the lead producer in the project with a 34 per cent interest, will close offices in Norman Wells and Fort Simpson, Northwest Territories, this year, and has reduced the size of its office in Inuvik, N.W.T., spokesman Jon Harding said Thursday.
Cheap shale gas that pulled down prices, and cost escalations played into the partners' decision to cut capital on the pipeline project, he said

Back in Alaska pipeline company TransCanada has asked permission to curtail work on the eastern part of the Alaska Gas Pipeline (LINK) and quote:

TransCanada has asked the commissioners of Natural Resources and Revenue to allow it to "curtail" its work on a line that would run from Alaska's North Slope into Alberta, Canada, to focus on a liquefied natural gas project, said Tony Palmer, the company's vice president for major projects development. TransCanada's piece of that project would be the pipeline.

So now there is one project with two probable phases. Alaska LNG pipeline Phase 1 (condensate to TAPS and gas Prudhoe Bay) then Phase 2 (Gas to tidewater + LNG plant).  Lots of permutations and iterations along the way, but many options are now off the table.  Expect LNG for Japan, Korea and China in about a decade.

Shell Out of Mackenzie Pipeline Project

Just once I'd like to hear some positve news about a North American Arctic gas pipeline.

Today we learn that Shell is pulling out of the Mackenzie gas pipeline (News LINK).

Shell is (was) an 11% player in the pipeline project. The project go / no-go date is December 2013.

Keep an eye on who picks up the Shell share - predictions?

The Canadians move ahead

In the snails paced world of arctic gas development the Canadians have pulled ahead. First, Kitimat LNG has awarded a Front End Engineering Design (FEED) contract to KBR, and announced plans to pursue an expansion of their project. The first plant will process 700 million cubic feet per day into about 5.5 million tons per year of LNG. Proposed expansion could add another 1 MTPA capacity. The proposed customers are in Asia and the target sales price of product is quoted at $12/MCF vs. $4/MCF in North American markets for the same gas. The Kitimat volumes are roughly 18% of the volumes of the Alaska Gas Pipeline project. Project description video from Kitimat webpage (LINK).


Secondly, the Canadian National Energy board has given the green light to the Mackenzie pipeline project. When completed the Mackenzie could move up to 1.2 Billion cubic feet per day of gas or about 26% of the capacity of the Alaska Gas Pipeline.

In terms of capacity the two Canadian projects will market about 44% of the volume of the Alaska Gas Pipeline. Best wishes to both projects - It's great to see some forward motion.

One Step Closer to an Arctic Gas Line

Canadian Federal Regulators have approved the Mackenzie Pipeline:

Vancouver Sun Link
Vancouver Sun Project timeline
CBCNews Link
Financial Post: Mackenzie Pipeline: A nation-builder
Bloomberg : Link
Canada’s National Energy Board report LINK

Weekend Update

The Canadians issued the "Report of the Joint Review Panel for the Mackenzie Gas Project" The report is supportive of the project. (LINK to press story). I take the view stated once by Dermot Cole - It's not a project until somebody starts ordering pipe (that goes for any Arctic Pipeline).

Shale OIL tidbit. It's not Shale GAS, but here's and interesting story on Exxon's research into production of shale oil in Colorado (LINK). They used a technique called “Electrofrac”. Basically they drill horizontal wells in the shale formation, fracture it, inject a conductive material then pour on the amps to resistively heat the formation until the hydrocarbons flow. What's the Alaska gas angle? Electrical power - lots of gas will be needed to produce the power needed to fry the foundations of Colorado and Utah. Note: the oil production objective is 162,000 bbls / acre. The overall resource is estimated in the Trillions of barrels of oil. Yeah they're gonna need some gas.

Speaking of Shale...Here's a story on shale gas in New York state (LINK). Apparently everyone does not have unconditional love for shale gas exploration and development. (LINK to Marcellus Shale info)

Finally - According to Halcro's website, something's cooking with DNR Commissioner Tom Irwin. With some luck maybe this player hater can move on.