May 3, 2012 / 5:53 PM / 5 years ago

Canadian Arctic gas partner willing to talk LNG

4 Min Read

CALGARY, Alberta (Reuters) - The native-owned corporation that would control a third of a long-delayed gas pipeline in Canada's Far North is open to discussing the idea of a liquefied natural gas project that would allow reserves to be shipped to Asia to kickstart development, its president said on Thursday

Bob Reid, president of Aboriginal Pipeline Group, said the company is not locked into a particular route and is "absolutely" willing to talk about changing plans to include an LNG option, an idea that appears to be building momentum as North American gas prices languish near 10-year lows.

"We're not constrained to routing at all, but at the moment there's not a plan to, let's say, go from the Mackenzie Delta westward," Reid said.

The APG was formed to take an ownership stake in the pipeline portion of the C$16.2 billion ($16.4 billion) Mackenzie Gas Project in the Northwest Territories. It has focused on 1,196 km (743 mile) line that would ship 1.2 billion cubic feet of gas a day along the Mackenzie River Valley to Alberta for sale within North America.

First envisioned in the 1970s, the pipeline received regulatory approval last year, but stalled amid depressed gas markets and the lack of a financial support deal with Ottawa.

The Sahtu, Gwich'in and Inuvialuit people of the Mackenzie Valley, who are the APG shareholders, would still have to get similar benefits as a condition for supporting any change from the approved project to focus on exports, Reid said.

This week, Northwest Territories Industry Minister David Ramsay said the territorial government could support a shift to an LNG project if it could kickstart development of vast Mackenzie Delta gas reserves, seen as a catalyst to economic growth in the sparsely populated region.

One possible option could be a pipeline that would take Canadian gas to an as-yet unbuilt transport system in Alaska for shipment to a terminal proposed for Valdez on the West Coast.

Bruce March, chief executive of Imperial Oil Ltd (IMO.TO), the lead partner in the Mackenzie project, said on Wednesday that liquefying the reserves could finally get the gas to market, four decades after it was discovered.

He said Mackenzie gas "could play in a world-scale LNG development," but it was too early to comment further.

Major oil companies seeking to develop even larger gas reserves on North Slope of Alaska have devoted efforts to moving supplies to the proposed Valdez plant for shipment to Asia, where prices are much higher than those in North America.

Previously, most resources went to attracting interest in a $40 billion pipeline to Canadian and U.S. markets.

Reid said moving Mackenzie gas along the coast to Alaska could be a possibility, but there is no current plan to do so.

"That's an obvious connection there but it does have some challenges," he said, noting the need to ship natural gas across the Alaska National Wildlife Refuge.

The nascent LNG industry in Canada could benefit the Mackenzie project in another way: by lifting gas prices across the continent, improving conditions for the original pipeline plan to Alberta, Reid said.

Imperial's March also said his company is looking at the possibility of building an LNG terminal on Canada's West Coast so gas from its massive Horn River shale reserves in British Columbia could reach Asian markets. It would join a list of several other players proposing such projects.

"We view those as positive, because it really is an increased market, which should result in improved pricing and make our project economic sooner," he said.

The Mackenzie partners must report back to the Canadian National Energy Board on a go-ahead decision and provide an updated cost estimate by the end of 2013. Construction must start by the end of 2015. ($1=$0.99 Canadian)

Editing by Janet Guttsman

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