Imperial Oil Leading Producers Group to Construct a New Pipeline to Connect the Stranded Gas Reserves of the Mackenzie Delta to Market

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). Imperial Oil Limited (Calgary Alberta) (TSE:IMO/AMEX:IMO) through its wholly owned subsidiary Imperial Oil Resources Ventures Limited (Calgary Alberta) is taking the lead position in developing the Mackenzie Gas Project (MPG). If developed, the $3 billion plus intergraded gas project could begin delivering 800 mmscfd to 1.2 Bcf/d of natural gas from the Mackenzie Delta to Northern Alberta in late 2008.

In January of 2002, plans to proceed to the project definition phase were announced. These plans include conducting conceptual engineering studies, preparing applications for regulatory approval and development plans environmental protection and monitoring. Expenditures in upwards of $150 million will be required to complete this phase. Colt Engineering Corporation (Calgary Alberta) has been awarded the conceptual engineering contract for the project.

The MGP will involve the development of three natural gas production fields, gas & NGL processing, a 1,300 km pipeline with compression and a 500 km liquids pipeline. The largest of the new fields will be Taglu with 3 Tcf of reserves (PEC 59000039) owned by Imperial Oil roughly 120 km north of Inuvik Northwest Territories. West of Taglu is the 1 Tcf Niglintgak field (PEC 59000040) owned by Shell Canada Limited (Calgary Alberta) (TSX:SHC) and to the south is the Parsons Lane field (PEC 59000038) with 1.8 Tcf of gas reserves 75 percent owned by ConocoPhillips Canada (North) Limited (Calgary Alberta) a subsidiary of ConocoPhillips (Houston Texas) (NYSE:COP) and 25 percent by ExxonMobil Canada Properties a subsidiary of ExxonMobil (Irving Texas) (NYSE:XOM). In total a proven reserve of 5.8 Tcf of natural gas with more in the probable column. From these gathering fields the gas will be transported via pipeline to a main compression facility at Inuvik (PEC 59000029) where final processing and liquids extraction would occur. From Inuvik the proposed pipeline would follow a 1,300 km route along the Mackenzie River to a point just south of the Northwest Territories/Alberta border. TransCanada (Calgary Alberta) (TSX:TRP) (NYSE:TRP) will extend its Alberta pipeline system to the MGP terminus point to provide final market access.

Three main scenarios for the main MGP pipeline are under consideration. First is the Base Case, which is a two-phase 30" diameter pipeline development with a transport capacity of 1.2 Bcf/d, 11 turbine-based compressor stations, and NGL facilities at Inuvik and Norman Wells with a 500 km 15,600 BBL/d 10" diameter NGL pipeline between the cities.

The second case is the 800 mmscf/d Reduced Case; the only difference in facilities would be five less compressor stations and a reduction in pipeline diameter.

The third case, Expanded Case is the single-phase construction of a 1.9 Bcf/d pipeline supported by 15 compressor stations with a larger NGL component.

The ownership of the pipeline itself will be split among the owners of the production fields with the largest ownership shares held by Imperial Oil at 34.4 percent and the Aboriginal Pipeline Group (APG) at 33.3 percent. The APG was formed to represent the ownership interest of Aboriginal Peoples of the Northwest Territories. TransCanada initiated a $50 load to the APG to cover their cost for the project definition phase. All things considered natural gas could be flowing into Alberta and therefore the U.S. by late 2008 or early 2009.

Canada holds about 59.7 Tcf of proven natural gas reserves and produces over 6.5 Tcf per year making it the world's third largest producer (after the US and Russia) and the second largest gas exporter (after Russia). Canada's natural gas exports go almost exclusively to the U.S.