Source: Reuters
Senior Exxon VP Andrew Swiger says that the company is still "advancing" the Mackenzie Valley Gasline project, despite the National Post's report earlier in the week that the Canadian federal government had decided not to provide financial support for the project.
Seeing as the NP's report has not been corroborated anywhere as of yet, this would seem a smart move.
Worth remembering a few potential implications here: Exxon/Mobil (through their Canadian subsidiary Imperial Oil) would have to essentially write off billions of dollars of development work that they have put into the Mackenzie Delta over the past four decades. And that's just the start.
The majors would lose a new "lane" from the Beaufort. They'd also lose potential supply from gasfields in the western Arctic. And then there's that nasty little matter of the debt incurred by the current members of the Aboriginal Pipeline Group; I could easily see the Canadian federal government being on the hook for that.
Assuming the Alaska Highway Gas Pipeline goes ahead (and I'm optimistic that it will), the Mackenzie line is only viable under the scenario that it gets finished first, and that gas gets to ship over it for three to five years before Alaska gas comes onstream.
There's other implications, too. If we gain some certainty about these pipeline projects, major energy customers in Canada and the lower 48 US can start making plans to use cheap gas, helping to build the market. This won't happen until projects are finally green-lit and underway.
Friday, October 30, 2009
Interesting Timing
Source: CBC
Frankly, the timing of this seems a little suspicious to me. I had known the National Post newspaper was in financial trouble (as is its owner, Canwest/Global), but I wasn't aware it was actually in danger of being shut down. Today, a court will rule whether C/G can move the paper into a corporate division with its other, money-making papers (yes, there still are some, like the Calgary Herald and the Montreal Gazette). Corporate bondholders are fighting this move, saying there's been enough bleeding. If the court rules in favor of the bondholders, the paper will close today.
And how (you may ask) is this a pipeline story? Because this is the very paper that quoted as-yet-unnamed sources that the Mackenzie Valley Gasline was dead in the water after Stephen Harper's cabinet refused financial support. There has been no corroboration of this story, and I now suspect it may have been a "hail mary" pass; an attempt to boost sales and relevence with a last-minute scoop.
Frankly, the timing of this seems a little suspicious to me. I had known the National Post newspaper was in financial trouble (as is its owner, Canwest/Global), but I wasn't aware it was actually in danger of being shut down. Today, a court will rule whether C/G can move the paper into a corporate division with its other, money-making papers (yes, there still are some, like the Calgary Herald and the Montreal Gazette). Corporate bondholders are fighting this move, saying there's been enough bleeding. If the court rules in favor of the bondholders, the paper will close today.
And how (you may ask) is this a pipeline story? Because this is the very paper that quoted as-yet-unnamed sources that the Mackenzie Valley Gasline was dead in the water after Stephen Harper's cabinet refused financial support. There has been no corroboration of this story, and I now suspect it may have been a "hail mary" pass; an attempt to boost sales and relevence with a last-minute scoop.
Tuesday, October 27, 2009
Pipeline dream "in peril"?
National Post
The Canadian business press has been buzzing over this today, though at this point it's hard to say how substantial this rumor really is.
Here's the upshot: federal Environment Minister Jim Prentice's department has been quietly working out a deal with the stakeholders in the Mackenzie Valley Gasline project, and they had all reached a rough agreement. But when Prentice presented a package to Cabinet, it was flatly turned down as being too costly.
We don't know what sources spoke to the National Post, or how definitive that refusal may have been. Prentice isn't talking, and spokesmen for both Imperial Oil and the Aboriginal Pipeline Group claim nothing has changed.
The question here is, if this item is true, and this indeed kills off the current incarnation of the Mackenzie Gasline project, what's the fallout?
The Canadian business press has been buzzing over this today, though at this point it's hard to say how substantial this rumor really is.
Here's the upshot: federal Environment Minister Jim Prentice's department has been quietly working out a deal with the stakeholders in the Mackenzie Valley Gasline project, and they had all reached a rough agreement. But when Prentice presented a package to Cabinet, it was flatly turned down as being too costly.
We don't know what sources spoke to the National Post, or how definitive that refusal may have been. Prentice isn't talking, and spokesmen for both Imperial Oil and the Aboriginal Pipeline Group claim nothing has changed.
The question here is, if this item is true, and this indeed kills off the current incarnation of the Mackenzie Gasline project, what's the fallout?
Sunday, October 25, 2009
AGIA Criticized. In Other News, Sky Blue, Grass Green...
Source: KTUU Anchorage
Petroleum Economist Roger Marks claims the Palin administration used "faulty accounting" when it awarded a license to TCPL under the AGIA. According to Marks, the AGIA is based on the "flawed conclusion that a pipeline owned by a third-party would be more profitable than one owned by major gas producers..."
What Marks is either forgetting or deliberately ignoring is that pipelines and producers are regulated under completely different structures, and that pipeline companies tend to do a more efficient job of operating (and building) pipelines than oil companies do.
He also manages to miss the fact that because these companies operate under different regulatory environments, pipeline construction presents a much different risk to the shareholders of TCPL than it would to those of the gas producers.
EDIT: With original Marks piece from AlaskaDispatch.com
I read this piece when it was originally posted, and probably should have commented on it. Marks' comments seemed to not only be based on a worst-case scenario, but on assumptions that are patently untrue. Marks' argument seems to come down to this: that if the producers are able to negotiate enough "certainty" in taxation with the state of Alaska, that they will choose to build their own line rather than using TCPL's. If this happens, the terms of the AGIA dictate that the state will have to pay TCPL treble damages. Marks claims this could be as much as $2 billion if TCPL claims gross expenses. However, the Revenue Commissioner that helped draft the AGIA legislation says that even TCPL's lawyers agree that given this "worst-case" scenario that only net expenses would qualify, cutting the bill to $400 million.
Still not chump change for a state with only a million or so population, but nowhere near the $2 billion Marks claims they're risking.
Petroleum Economist Roger Marks claims the Palin administration used "faulty accounting" when it awarded a license to TCPL under the AGIA. According to Marks, the AGIA is based on the "flawed conclusion that a pipeline owned by a third-party would be more profitable than one owned by major gas producers..."
What Marks is either forgetting or deliberately ignoring is that pipelines and producers are regulated under completely different structures, and that pipeline companies tend to do a more efficient job of operating (and building) pipelines than oil companies do.
He also manages to miss the fact that because these companies operate under different regulatory environments, pipeline construction presents a much different risk to the shareholders of TCPL than it would to those of the gas producers.
EDIT: With original Marks piece from AlaskaDispatch.com
I read this piece when it was originally posted, and probably should have commented on it. Marks' comments seemed to not only be based on a worst-case scenario, but on assumptions that are patently untrue. Marks' argument seems to come down to this: that if the producers are able to negotiate enough "certainty" in taxation with the state of Alaska, that they will choose to build their own line rather than using TCPL's. If this happens, the terms of the AGIA dictate that the state will have to pay TCPL treble damages. Marks claims this could be as much as $2 billion if TCPL claims gross expenses. However, the Revenue Commissioner that helped draft the AGIA legislation says that even TCPL's lawyers agree that given this "worst-case" scenario that only net expenses would qualify, cutting the bill to $400 million.
Still not chump change for a state with only a million or so population, but nowhere near the $2 billion Marks claims they're risking.
Saturday, October 24, 2009
A Picture tells a Thousand Words
Source: TCPL via Alaska Gas Pipeline Blog
This picture says it all, and here's what it means: when gasline critics point out the potential market impact of new shale-gas deposits, they neglect to account for the declines in conventional supplies that we have seen over the past several years.
I'll reiterate: new supplies will bring down prices, which will stimulate demand. Given the lead time needed for northern pipeline projects, this just means that prices should be strong when these lines come onsteam.
Monday, October 19, 2009
Mackenzie Line "never closer" - Prentice
Calgary Herald
Jim Prentice intimates here that the Mackenzie Valley Gasline is a national environmental priority.
In a discussion with the Calgary Herald's editorial board, Prentice said he expects the National Energy Board to hear final arguments in April, 2010, contingent on the Joint Review Panel submitting its final report in December.
This isn't out of line with expectation, but it's intriguing how confident Prentice is about this timeline. I can only assume that he is keeping very close tabs on the JRP.
I predict we'll see a formal project announcement by the end of Q3 next year...
Jim Prentice intimates here that the Mackenzie Valley Gasline is a national environmental priority.
In a discussion with the Calgary Herald's editorial board, Prentice said he expects the National Energy Board to hear final arguments in April, 2010, contingent on the Joint Review Panel submitting its final report in December.
This isn't out of line with expectation, but it's intriguing how confident Prentice is about this timeline. I can only assume that he is keeping very close tabs on the JRP.
I predict we'll see a formal project announcement by the end of Q3 next year...
Friday, October 2, 2009
Some background: TCPL
Alaska Journal
Alaska Journal has posted this Tim Bradner piece that outlines TCPL's history regarding Alaska gas.
It's a good, sympathetic piece, albiet with some inaccuracies. First off, TCPL wasn't actually involved back in the '70s. The original Canadian partner was Foothills Pipelines. Foothills did, indeed do a lot of field and engineering work on the original proposal. They also secured a great deal of right-of-way permitting along the Alaska Highway in the Yukon and northern BC, which they still maintain.
However, TCPL did not buy Foothills in 1994. Foothills was actually merged with Alberta Gas Trunk Line to form Nova Corporation back in the early '80s. Foothills was maintained as a discrete division of Nova. Nova ran the gas transmission network within the province of Alberta (which probably had as many miles of pipe as TCPLs national network that covered the rest of Canada). Nova was actually an ambitious economic diversity initiative of the Alberta provincial government under Peter Lougheed, and at one point had a cell phone division (which was spun off as Novatel, and still makes wireless networking products), and a chemical division that still operates a massive ethylene complex east of Red Deer, AB.
Foothills/Nova constructed the so-called "Alaska pre-build" in the 80s. This is a leg that runs down the eastern slope of the Alberta Rocky Mountains, going into British Columbia through the Crowsnest Pass and eventually into the northwestern US This pre-build section was meant to increase overall capacity of the Nova network to transmit Alaska gas to the lower 48, though it has worked just fine in this regard in moving Alberta and Northern BC gas instead.
Nova combined with TCPL in 1998 in one of the biggest corporate mergers in Canadian history. The cell phone and chemical divisions were spun off as separate companies, and TCPL moved its corporate headquarters to Calgary, where they combined with Nova's pipeline management in a brand-new skyscraper.
Merging with Nova, TCPL inherited Foothills and its Alaska gas plans. Since Foothills has maintained rights-of-way all the way along the Canadian portion of the route, it believes it maintains the right to build that it was granted back in the 70s. Enbridge Pipelines disputes this, and the case is currently before the Supreme Court of Canada.
Alaska Journal has posted this Tim Bradner piece that outlines TCPL's history regarding Alaska gas.
It's a good, sympathetic piece, albiet with some inaccuracies. First off, TCPL wasn't actually involved back in the '70s. The original Canadian partner was Foothills Pipelines. Foothills did, indeed do a lot of field and engineering work on the original proposal. They also secured a great deal of right-of-way permitting along the Alaska Highway in the Yukon and northern BC, which they still maintain.
However, TCPL did not buy Foothills in 1994. Foothills was actually merged with Alberta Gas Trunk Line to form Nova Corporation back in the early '80s. Foothills was maintained as a discrete division of Nova. Nova ran the gas transmission network within the province of Alberta (which probably had as many miles of pipe as TCPLs national network that covered the rest of Canada). Nova was actually an ambitious economic diversity initiative of the Alberta provincial government under Peter Lougheed, and at one point had a cell phone division (which was spun off as Novatel, and still makes wireless networking products), and a chemical division that still operates a massive ethylene complex east of Red Deer, AB.
Foothills/Nova constructed the so-called "Alaska pre-build" in the 80s. This is a leg that runs down the eastern slope of the Alberta Rocky Mountains, going into British Columbia through the Crowsnest Pass and eventually into the northwestern US This pre-build section was meant to increase overall capacity of the Nova network to transmit Alaska gas to the lower 48, though it has worked just fine in this regard in moving Alberta and Northern BC gas instead.
Nova combined with TCPL in 1998 in one of the biggest corporate mergers in Canadian history. The cell phone and chemical divisions were spun off as separate companies, and TCPL moved its corporate headquarters to Calgary, where they combined with Nova's pipeline management in a brand-new skyscraper.
Merging with Nova, TCPL inherited Foothills and its Alaska gas plans. Since Foothills has maintained rights-of-way all the way along the Canadian portion of the route, it believes it maintains the right to build that it was granted back in the 70s. Enbridge Pipelines disputes this, and the case is currently before the Supreme Court of Canada.
Subscribe to:
Posts (Atom)