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The sun sets over the Mackenzie Delta near Inuvik, Northwest Territories November 11, 2009. (STAFF/REUTERS)

The sun sets over the Mackenzie Delta near Inuvik, Northwest Territories November 11, 2009.

(STAFF/REUTERS)

Mackenzie pipeline partners chop spending on project Add to ...

Partners in the long-delayed Mackenzie gas pipeline in Canada’s Far North have chopped spending and closed some offices as gas prices slump and efforts to wrest financial support from Ottawa drag on with no deal in sight, they said on Thursday.

In the latest setback for the $16.2-billion project, Imperial Oil Ltd. and its partners have shut down offices in Norman Wells and Fort Simpson, Northwest Territories, and reduced the size of its office in Inuvik, N.W.T., spokesman Jon Harding said.

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He did not disclose how much money was being pulled, but he stressed that the proposal was not dead and talks with the government in trying to move it forward are still going on.

“What this is, is, yes, a reduction in spending and a reduction in activity, he said.

Under the regulatory approval granted for Mackenzie in 2011 following a seven-year review, the partners must make a go-ahead decision by the end of next year.

For its part, ConocoPhillips Co. said on Thursday that the suspension of work will prompt a non-cash impairment of $525-million (U.S.) after tax for the first quarter. Besides being a partner in the pipeline, it has a 75 per cent interest in the Parsons Lake gas field in the Mackenzie Delta on the Beaufort Sea Coast, one of three “anchor fields” for the development.

The economic viability of the 1,196-kilometre pipeline has become increasingly questionable due to steadily rising costs and depressed natural gas prices as vast new shale gas supplies have been developed much closer to major markets.

Imperial’s chief executive officer, Bruce March, said last month that he did not believe the project’s time had passed, however.

The company, which is the Canadian affiliate of Exxon Mobil Corp. , and the government of Prime Minister Stephen Harper resumed discussions last year over a multibillion-dollar support package for Mackenzie.

It would provide funding for roads, airstrips and other infrastructure in the sparsely populated and largely undeveloped Northwest Territories, although talks have dragged on for years.

The line would carry 1.2 billion cubic feet of gas a day to Canadian and U.S. markets from the Mackenzie Delta. It was first envisioned in the 1970s.

North American natural gas prices have slumped in recent months to 10-year lows. That has also prompted proponents of a larger Alaska gas pipeline proposal to rethink a long-haul line to southern markets and consider liquefied natural gas exports to Asia instead.

The other Mackenzie partners are Royal Dutch Shell PLC , Exxon Mobil and the Aboriginal Pipeline Group. Last year, Shell put its stake on the block but it has yet to announce a buyer.

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