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A Perspective on the Mackenzie Valley Pipeline Project

www.westcoastenergy.com. A Perspective on the Mackenzie Valley Pipeline Project. C. Bruce Scott Director, Mackenzie Valley Pipeline Initiative. October 19, 2001. B-Scott_Mackenzie-Valley_Oct-19-2001.ppt. 1. ALASKA. Westcoast. Pipeline. CANADA. PNG. Centra . Gas B.C. Alliance.

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A Perspective on the Mackenzie Valley Pipeline Project

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  1. www.westcoastenergy.com A Perspective on the Mackenzie Valley Pipeline Project C. Bruce Scott Director, Mackenzie Valley Pipeline Initiative October 19, 2001 B-Scott_Mackenzie-Valley_Oct-19-2001.ppt 1

  2. ALASKA Westcoast Pipeline CANADA PNG Centra Gas B.C. Alliance Maritimes Empire Union Gas AGT Vector U.S.A. Texas Eastern East Tenn Gulfstream Continental Energy MarketWestcoast Energy - Duke Energy • Duke Energy Acquisition Proposal • Strong North American Position • Good for Westcoast Shareholders and Energy Development • Expected Closure by First Quarter 2002 B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  3. Demand for Natural Gas North American Natural Gas Demand The market opportunity for Arctic gas, coalbed methane, offshore supplies and new LNG import terminals Supply from Existing Basins • Gas production from existing basins will not keep pace with demand • Long-term prices will increase to encourage new supply development B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  4. Mackenzie Delta+1 Bcf/d - 2008/2009? Prudhoe Bay+2.4 Bcf/d - 2008/2009? Scotian Shelf+0.7 Bcf/d - 2005+0.8 Bcf/d - 2010 Burgos Basin???? Deepwater Gulf+2 Bcf/d - 2005 Frontier Supply Responses • Strong long-term gas prices support frontier supply development • North America needs both Arctic gas supplies as soon as possible B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  5. Mackenzie Valley Pipeline Alaska Highway Pipeline The Routing Debate Prudhoe Bay Mackenzie Delta Inuvik Fairbanks Anchorage Norman Wells Whitehorse Yellowknife Fort Liard Fort Nelson Boundary Lake Fort St. John • Two pipelines are required for optimum development of Arctic gas • All jurisdictions will gain benefits from a two-pipeline model B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  6. Capital Cost Northern Gas Pipeline Development Routing Comparisons 14 12 10 8 Capital Cost (Billion US$) 6 4 MV - Mackenzie Valley ANGTS - Alaska OTT - Over-the-Top (Prudhoe Bay / Mackenzie Delta) 2 0 MV ANGTS ANGTS + MV OTT/MV Initial Ultimate • ANGTS enjoys construction cost advantages due to year round access provided by the Alaska Highway • Over-the-Top route has major cost adders due to: • Short and uncertain construction season • Twin lines in the Beaufort Sea section are needed for reliability B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  7. Mackenzie Valley PipelineProducers’ Development Concept • Focus on onshore gas • Route through Mackenzie Valley • Parallel oil pipeline right-of-way • Use proven technology • Initially transport 0.8 bcf per day • Provide access to explorers • Allow for extensions/expansions Alaska Nunavut Northwest Territories Yukon 1,025 miles 30” diameter 2,050 psig US$ 2.7-3.1 billion Alberta B.C. • Standalone pipeline is lowest cost, quickest way to market for Mackenzie Delta gas B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  8. Mackenzie Valley PipelineStatus Commentary • Establishing interdependent business relationships • Gaining broad acceptance from all communities • Harmonizing regulatory/environmental assessment process • Preparing regulatory filing • Securing markets for gas and pipeline capacity • Formulating sound technical and commercial models • Developing programs for training northern people • Firming up adequate onshore gas reserves • Resolving routing debate and determining development timing • Developing downstream pipelines in market-based manner • Proponents must aggressively address many near-term challenges B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  9. The Energy Spine of Canada’s Western Arctic • Mackenzie Valley gas pipeline • Gas gathering and processing • Gathering lines from other areas • Laterals to serve communities • Liquids extraction/handling • Power generation and distribution • Downstream pipeline expansions • Gas gathering and processing Alaska • Gathering lines from other areas Nunavut • Laterals to serve communities Northwest Territories • Liquids extraction/handling Yukon • Power generation and distribution Alberta • Downstream pipeline expansions B.C. • The pipeline will lead to further development of energy infrastructure B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  10. South of 60o Takeaway Capacities • Pipeline Options: • TransCanada • Alliance • Foothills / ANG / PGT • Foothills / Northern Border • Westcoast / Williams • New greenfield • Issues: • Western Canada supply • Market pull • Tolling structures • Producer netbacks • Liquids extraction point • Existing systems with some expansions can move both Mackenzie Delta and Alaskan gas to growth markets B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  11. Prudhoe Bay Mackenzie Delta 4.0 bcf/d 1.2 bcf/d Boundary Lake 4.0 bcf/d 1.2 bcf/d Seattle Chicago San Francisco Continental Gas Demand and Supply • Arctic gas will flow to both eastern and western markets B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  12. Concluding Remarks • There will be a home for Arctic gas • Both Arctic pipelines are required • Mackenzie Valley project is viable, but proponents, governments and regulators must be creative • The pipeline is only one component of development B-Scott_Mackenzie-Valley_Oct-19-2001.ppt

  13. www.westcoastenergy.com 13

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