By Michael Ganley Will they or won’t they? Wouldn’t we all like to know Here are some of the things corporate leaders are considering

There’s little doubt about what the National Energy Board will do this fall. After hearing from the parties and weighing the evidence, it will make a recommendation to Parliament that, subject to conditions, the Mackenzie Gas Project is in the public interest and should be allowed to proceed.

The decision will have little immediate impact, since the proponents (Imperial Oil, Shell, ConocoPhillips, ExxonMobil and the Aboriginal Pipeline Group) have already announced that they won’t make a decision to proceed or not until 2013 at the soonest, and that natural gas won’t flow until at least 2018. But things can change quickly in the energy world, and the corporate leaders will be weighing the factors that affect the construction of the pipeline at regular intervals.

We’re all wondering what’s going on in those corporate boardrooms, so here are a few insights from Ian Nathan, an analyst with Energy Intelligence in New York.

The decision will depend on many corporate considerations: the price of gas; the estimated cost of construction; what other petro-projects they have on the go; what their competitors are doing to bring new sources of gas to the market; what Russia’s up to; and Qatar; and Australia; and how much threat/opportunity does shale gas pose.

So will they or won’t they?

The Henry Hub price: The Henry Hub is an actual place in Louisiana where 13 natural gas pipelines intersect. The prices set there are generally seen as the primary price for the North American gas market. Prices this year have hovered between $5.00 and $7.00 per million British Thermal Units (mmBtu), higher than last year, but below the norm over the last six years. Where they will go in the short term is a matter of speculation, but long term they’ll go up.

LNG: One of the darlings of the energy world, giant ships ply the earth’s oceans carrying liquefied natural gas from producers to consumers. Dozens of specialized facilities to receive LNG are under construction or proposed for North America, but many of them face stiff opposition from people who don’t want enormous energy facilities in their backyards.

And keep in mind, LNG only accounted for 7.5 per cent of global gas consumption in 2008 (up from 4.6 per cent in 1996). As Nathan says, “We live in a pipeline world.” He adds that any number of politicians suffer from NIMTO (not in my term of office) when it comes to LNG facilities.

Shale gas: Another source of gas that is getting plenty of hype. Giant geological formations like the Marcellus Shale, which underlies much of Ohio, Pennsylvania and New York, are being coaxed into releasing their gas through advances in hydraulic fracturing, or “fracking”, in which water and an undisclosed mixture of chemicals are pumped into the rock under high pressure to crack it and release gas. The Marcellus and other formations contain mind-blowing quantities of gas, but many questions surround the technology: Do the chemicals pollute groundwater? What is the rate at which gas can be coaxed to flow? What are the regulatory and environmental issues?

Australia and Qatar: The land down under and the tiny Arabian state both have massive natural gas deposits and plans to develop them, but they’re just plans, and they’d need LNG facilities to deliver it.

Egypt, Indonesia, Oman: These and other countries subsidize natural gas to stimulate their economies, but the practice reduces investment and causes gas to be consumed quickly. Will they reverse these policies?

Demand issues: Demand will go up, but by how much depends in part on the success of conservation and efficiency efforts.

Competing fuels: Whither nuclear, renewables and clean coal?

Shtokman: A huge gas field in the Russian Arctic, Moscow has big plans to ship some of it to North America, but would need $8/mmBtu to do it economically.
The “fiscal framework”: How much is the federal government going to kick in to support the pipeline and how little is it going to take out in taxes and royalties?

In a recent presentation delivered to the oil industry in Calgary, Nathan wouldn’t comment on whether the proponents will build the MGP, but did say despite its limitations (regulatory delays, a long way form market, relatively small deposits), gas is rising on the corporate-priority scale, global reserves are growing more slowly than is consumption, and much of the low-hanging fruit has been picked.