April 5, 2012 / 4:37 PM / 5 years ago

UPDATE 2-Canadian Arctic pipeline partners chop spending

* Partners close, downsize Northwest Territories offices
    * Imperial says project not dead
    * ConocoPhillips expects $525 mln non-cash charge


    By Jeffrey Jones	
    CALGARY, Alberta, April 5 (Reuters) - Partners in the
long-delayed Mackenzie gas pipeline in Canada's Far North have
chopped spending and closed some offices as gas prices slump and
efforts to wrest financial support from Ottawa drag on with no
deal in sight, they said on Thursday.	
    In the latest setback for the C$16.2 billion ($16.3 billion)
project, Imperial Oil Ltd and its partners have shut
down offices in Norman Wells and Fort Simpson, Northwest
Territories, and reduced the size of its office in Inuvik,
N.W.T., spokesman Jon Harding said.	
    Harding did not disclose how much money was being pulled,
but he stressed that the proposal was not dead and talks with
the government in trying to move it forward are still going on.	
    "What this is, is, yes, a reduction in spending and a
reduction in activity, he said.	
    Under the regulatory approval granted for Mackenzie in 2011
following a seven-year review, the partners must make a go-ahead
decision by the end of next year. 	
    For its part, ConocoPhillips said on Thursday that
the suspension of work will prompt a non-cash impairment of $525
million after tax for the first quarter. Besides being a partner
in the pipeline, it has a 75 percent interest in the Parsons
Lake gas field in the Mackenzie Delta on the Beaufort Sea Coast,
one of three "anchor fields" for the development.	
    The economic viability of the 1,196 km (743 mile) pipeline
has become increasingly questionable due to steadily rising
costs and depressed natural gas prices as vast new shale gas
supplies have been developed much closer to major markets.	
    Imperial's chief executive, Bruce March, said last month
that he did not believe the project's time had passed, however.	
    The company, which is the Canadian affiliate of Exxon Mobil
Corp, and the government of Prime Minister Stephen
Harper resumed discussions last year over a multibillion-dollar
support package for Mackenzie.	
    It would provide funding for roads, airstrips and other
infrastructure in the sparsely populated and largely undeveloped
Northwest Territories, although talks have dragged on for years.	
    The line would carry 1.2 billion cubic feet of gas a day to
Canadian and U.S. markets from the Mackenzie Delta. It was first
envisioned in the 1970s.	
    North American natural gas prices have slumped in recent
months to 10-year lows. That has also prompted proponents of a
larger Alaska gas pipeline proposal to rethink a long-haul line
to southern markets and consider liquefied natural gas exports
to Asia instead. 	
    The other Mackenzie partners are Royal Dutch Shell,
Exxon Mobil and the Aboriginal Pipeline Group. Last year, Shell
put its stake on the block but it has yet to announce a buyer.

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