Alberta energy minister says Alaska pipeline could beat Mackenzie gas line
EDMONTON (CP) — Alberta’s energy minister says an American pipeline to bring Arctic gas to southern markets has advantages over a proposed Canadian route and will probably beat the long-awaited Mackenzie Valley line.
“There are some inherent benefits in a tight economic situation that would probably favour the Alaska pipeline,” Ron Liepert said recently. “When you look at all of the factors and when you look at the economics, I don’t think it’s unreasonable to suggest that Alaska gas could be flowing through Alberta sooner than Mackenzie gas.”
The Mackenzie Valley natural gas pipeline, a $16-billion proposal led by Imperial Oil (TSX:IMO), has been discussed and debated for years and is currently hung up in the regulatory process. It is often touted as an economic saviour for the western Arctic because it would open a whole new basin to energy exploration.
But analysts have always warned that if it were to be built at all, it would need to be built before an Alaskan line soaked up the needed capital and labour and flooded the market with that state’s much larger volumes of gas.
Liepert points out that
natural gas from Alaska’s Prudhoe Bay field has already led to a full range of energy infrastructure such as airstrips and work camps. The Mackenzie Delta has much less — a difference that may be crucial in a time of low gas prices when any economic margin is important.
“The reality is you have significant infrastructure in place in Prudhoe Bay and to my knowledge none of that exists in the Mackenzie Valley,” Liepert said. “That is a disadvantage if the final decision’s going to come down to economics.”
Alaska gas may even be better for Alberta in some ways since it carries more of the liquid hydrocarbons the province’s petrochemical industry uses for feedstock, Liepert suggested.
“Our petrochemical industry is suffering from a feedstock shortage today that is causing real difficulties. Any opportunity we would have to strip liquids from natural gas flowing through our province would be welcomed.”
Liepert said any decision on which pipeline is built first will be made by the private sector. He said the Alberta government would still like to see the Mackenzie line proceed.
But he has his doubts.
“Because of the development that’s already in place in Alaska, (they) have quite an advantage over Mackenzie. That’s
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where I think the Alaska pipeline has a large advantage.”
Liepert’s words surprised Imperial spokesman Pius Rolheiser.
“We were not aware (Liepert) was going to be commenting on it,” he said. “There has been no change or lessening of commitment on our part (to the project).”
Liepert was just saying what the market has long concluded, said energy analyst Stephen Paget of FirstEnergy Capital in Calgary.
“He’s seeing what people in the industry that I know are saying: Alaska looks like it’s going to come first.”
Paget said the Prudhoe Bay field was originally built with the intent of exploiting its natural gas, so its higher costs aren’t as much of a factor. “They can live with a small netback on the gas.”
Mackenzie’s window has closed, he added.
“If it was going to be done, it needed to be done years ago.”
When Arctic gas reserves re-emerged as a possible development about a decade ago, observers such as the head of British Petroleum suggested gas would be flowing south by now. Instead, the Mackenzie project is still waiting for ministerial approval, some kind of financial backstop from the federal government and final approval from Imperial’s board to go ahead.
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