It likely will be 2 years before a full application can be filed with regulators for a Mackenzie Valley gas pipeline, said the spokesman for the producer group holding Delta reserves.
K.C. Williams, senior vice-president of Imperial Oil Ltd., which heads the group, said work to prepare an application will include preliminary engineering and dealing with aboriginal communities on their individual benefits plans. He said the producer group would prepare a preliminary information package that will better describe the project. This will help regulators to gear up their organizations so that they will be able to deal with as many as 400-500 permits required for construction.
"We support the coordination of regulatory processes, but not shortcuts," he said. "We want permits that have legal integrity."
Williams said a Memorandum of Understanding completed in October with the Aboriginal Pipeline Corp. is unique in that it allows the aboriginal group to come in-as if they own one third of the gas reserves-during the predevelopment phase, which is from the time that the intention to file an application is announced until a permit to construct is received.
He said the producer and aboriginal groups are working on commercial terms, which will be similar to a joint venture agreement. It would define such issues as routing procedures and specifying Imperial as the operator.
The Imperial executive said the actual funding that aboriginal participants will need during this period is a very manageable sum and far less than the estimated $1 billion (Can.) cost of a one-third interest in the pipeline.
"There have been reports that they will need $1 billion to play this game. They won't need that kind of financing until there's actually a commitment to construct after we have a permit," Williams said.
"We're talking in terms of up to $200 million [Can.] from today until we have a permit. Their share of that is $60-70 million, and you can divide that by 3 years or so. So you are talking about $15-25 million/year for their share."
Williams said it would take about 3 years and $3 billion to build a line. The current concept is a 30-in. line with expansion capacity and additional compressor stations. Field development and gathering systems would add another $1 billion (Can.) to the development cost. He said the actual size of a pipeline would be determined by nominating processes to be put into place.
"The pipeline would use conventional technology. It is much more manageable in terms of what can be accommodated in the market, and it can be executed in an efficient manner," Williams said.
Williams said the Delta producer group has not allowed itself to be linked to a decision on the development of Alaskan gas. He said Imperial, which holds 50% of the anchor reserves, and other members of the group have placed a high priority on advancing the development of Delta reserves.
"I can't control what happens in Alaska. We just focus on what we can control and [on] building relationships, confidence, and respect between the aboriginal group who have land claims and producers who hold rights to the gas," Williams said.
"If Alaskan gas comes on-and comes on at the rate advertised-it would cause a depression in the gas market. That price risk is something we deal with every day in our business."
