Northwest Territories open to LNG option

CALGARY, Alberta (Reuters) - The government of Canada’s Northwest Territories, hit by persistent delays in development of a C$16.2 billion ($16.5 billion) natural gas pipeline, could support a liquefied natural gas alternative for vast reserves in the region’s Mackenzie Delta, one of its ministers said on Tuesday.

A month after proponents of the Mackenzie Valley gas pipeline said they had chopped spending on the project, David Ramsay, the territories’ minister of industry, tourism and development, said LNG has to be looked at as an option.

“I think as a territory we have to keep all our options open - that’s the most important thing. We have the resource. How do we get it out? How do we get it to market? All of those options have to be analyzed,” Ramsay said in an interview after a press conference at an offshore technology conference in Houston.

“We just need to move forward. We can’t just sit back and wait for things to happen. We have to make things happen.”

Holders of gas reserves in Canada’s Far North have discussed a pipeline to southern markets since the 1970s, and Imperial Oil Ltd has led efforts over the past decade to move the project forward with support from aboriginal groups who seek economic development in their communities.

The Mackenzie pipeline project won regulatory approval in 2011 following a seven-year review, but Imperial and its partners have not given a corporate green light to it as North American gas prices languish near 10-year lows and talks aimed at getting financial support from Ottawa have not borne fruit.

One partner, Royal Dutch Shell put is stake on the block last year but has yet to announce a buyer.

Major oil companies seeking to develop even larger reserves on North Slope of Alaska have devoted efforts to moving supplies to a proposed gas liquids plant in Valdez to be shipped to Asia, where prices are richer. Previously, most resources went to attracting interest in a $40 billion pipeline to Canadian and U.S. markets.

Ramsay met with officials from Mackenzie project partners Exxon Mobil Corp and ConocoPhillips while in Houston, and said he remains optimistic that the proponents will soon be able to put a timeline on moving forward with the development.

“First and foremost we support the Mackenzie Gas Project and we will continue to do that,” said Ramsay.

“But at the end of the day, all of our options need to be kept open and we’re willing to discuss any opportunities or options with anybody who’s interested in developing our resources.”

In April, Imperial and ConocoPhillips said they had chopped spending on the Mackenzie project and closed some regional offices in the Northwest Territories, but stressed that the proposal was not dead.

For ConocoPhillips, the slowdown prompted a $525 million impairment charge. Besides being a Mackenzie partner, it has a 75 percent stake in the Parsons Lake gas field in the delta, which was discovered in the 1970s.

For its part, lead partner Imperial said the partners have examined LNG options in the past, but they remain focused on the 1,196 km (743 mile) pipeline, which would carry up to 1.2 billion cubic feet a day to Alberta, where it could be routed to numerous Canadian and U.S. markets.

“I would be loathe to comment on what others might offer in terms of development, but we continue to believe that is the best approach to commercializing Mackenzie gas,” Imperial spokesman Pius Rolheiser said.

He pointed out that the regulatory permit is based on the pipeline.

The other partner in the Mackenzie pipeline is the Aboriginal Pipeline Group, owned by the region’s native groups. It would own up to a third of the project.

Ramsay was in Houston to talk about the sparsely populated territory’s other energy potential as well, including an early-stage shale oil development in the central region near Norman Wells and immense but hard-to-develop oil reserves in the Beaufort Sea.

There, Chevron Corp plans to gather seismic data this summer.

($1=$0.98 Canadian)

Editing by David Gregorio