Waiting on a pipeline: MGM stalls drilling because of pipe delay.
MGM mothballs Arctic drill as pipe lags
Canadian outfit MGM Energy said today it has pushed back spending on its northern Canadian exploration, blaming regulatory delays that have stalled a C$16.2 billion (US$13.7 billion) gas pipeline.
MGM said it restructured its exploration agreement with supermajors Chevron and BP so it will no longer be committed to spending up to C$60 million on three final wells in their deal by April next year.
Instead, it will drill the wells within three years after the Mackenzie Gas Pipeline consortium, led by Canadian giant Imperial Oil, makes its decision to go ahead with the 1220 kilometre (760 mile) gas line in the Northwest Territories, according to a Reuters report.
The company will also defer remaining seismic work, which it pegged at C$26 million.
"Given the complete lack of progress on the regulatory process, in particular the Joint Review Panel, and the lack of a fiscal agreement between the pipeline proponents and the government of Canada, we believe that deferral of spending ... is in the best interests of our shareholders," MGM president Henry Sykes said in a statement.
As part of the new deal, MGM will become operator of the joint venture.
It will still immediately earn a 50% stake in the lands covered by the agreement as well as previous Chevron-BP discoveries in the Mackenzie Delta, it said.
MGM and its partners are not members of the Mackenzie consortium, but any gas development on their lands would require the pipeline to move supply to markets.
In December, the Joint Review Panel, which is examining the environmental and socioeconomic impacts of the project, said it planned to release its report at the end of this year, several months beyond the previous target.
The JRP report is needed before Canada's National Energy Board can make its ruling on whether the project can proceed.
The pipeline's backers are also weighing fiscal proposal from Ottawa, which includes an offer to help fund some of the associated infrastructure like roads and airfields.