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NWT hopeful of revamped Mackenzie gas project

The sun and sundogs rise above the Inuvik-to-Tuktoyaktuk highway which is under construction near the Beaufort Sea coast.

Jeffrey Jones/The Globe and Mail

This is part of a series looking at infrastructure projects designed to create economic opportunities in the North.

Before the end of the year, Imperial Oil Ltd. and its partners must inform the National Energy Board of its intentions with the Mackenzie gas project, the $16.2-billion pipeline from the Arctic which has stalled due to the flood of cheaper supplies closer to major North American markets.

The people of the Northwest Territories have waited for years for the project to get under way, but with the shale gas revolution in full swing it is doubtful that it will proceed as proposed. In October, Imperial CEO Rich Kruger told The Globe and Mail that the company is studying a revamp of Mackenzie that could see it reborn as part of a larger initiative for export of liquefied natural gas, though a plan is far from finalized.

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In the short term, it means more delay for a northern region anxious for economic growth and jobs. But Dave Ramsay, the NWT's Minister of Industry, Tourism and Investment, believes the move is positive in the long term as it means that the three major gas fields in the Mackenzie Delta that anchor the pipeline could still be developed. Meanwhile, future energy proposals will be made as the territory gets more decision-making power from Ottawa under the devolution process.

What is your view of the current thinking about the Mackenzie project?

That possibility is real. It's not something they dreamt up. So for us, that's the best news we've heard on the project in some time. Just the fact that the proponents are still interested in constructing that pipeline is good news for us. If it's five or 10 years out, it's something that we can hopefully look forward to for getting Mackenzie gas to market.

With what is happening in the central Mackenzie Valley with tight oil (the Canol shale oil prospect near Norman Wells, NWT), if that does become a commercially viable play, then all of a sudden there are tremendous amounts of natural gas and natural gas liquids that are going to be produced as a by-product of the oil extraction. That needs to find a way out to market, so that might enter into the economic viability of the Mackenzie gas project itself.

As the NWT takes on powers under the devolution process, what lessons do you take from the regulatory review for Mackenzie, which took six years, a period in which the gas market changed?

We're not interested in seeing long, drawn-out processes that are going to take opportunities away from our territory. We can use the size of our government to our advantage. We're not some big, cumbersome bureaucracy. We can see the direct impact that decisions are going to have on people, on the economy and on our environment, and we can act accordingly.

Do you foresee Mackenzie gas being converted to LNG in the North, with operations aided by the new highway, or flowing to the British Columbia coast for liquefaction?

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The more likely scenario is that Mackenzie gas feeds facilities in B.C., but that could change. Still, we'd be looking at $20-billion investment by the proponents.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in mergers, acquisitions and private equity for The Globe and Mail’s Report on Business. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general topics. More

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