Yellowknife (May 08/06) - A lack of skilled labour and other construction costs to build the proposed Mackenzie Valley gas pipeline may drive up the bill for the project, but building the line is still very much alive in the minds of Imperial Oil's top boss.

Encana's N-16 well was busy drilling for natural gas near Kugmallit Bay in the Mackenzie - Delta in the spring of 2005. The gas is in the Delta, it's a matter of building a pipeline at a cost to make retrieving it worthwhile. Imperial Oil says labour is one of the factors expected to push the pipeline higher than $7.5 million. - NNSL file photo Building the Mackenzie gas pipeline project will consume 200 million litres of diesel fuel and require 400,000 tonnes of steel. It will take three years to build, starting probably in 2008 if regulatory approvals are achieved by late 2007. Up to 1.2 billion cubic metres of natural gas is expected to pump through the 1,200 kilometres of pipeline, from the Mackenzie River delta to the Alberta border. The project is a joint venture between Imperial Oil Ltd., the Aboriginal Pipeline Group, Shell Canada, ConocoPhillips, and Exxon Mobil Canada.

During a shareholders meeting in Calgary May 2, Tim Hearn, Imperial CEO and president, said costs for the 1,200 km pipeline are expected to increase from the present $7.5 billion estimate.

"I don't think we're anywhere close to pulling the plug," said Hearn. "We can't push billions beyond $7.5 billion, or I think we'll have some pretty difficult decisions to make."

His words shouldn't come as any surprise, said Imperial spokesperson Hart Searle.

"This is not something that is entirely new," Searle said. "We've been talking about this for a while now."

The companies promoting the pipeline expect to have a firmer price projection later this year.

According to Searle, the challenge is that no one, not even Imperial Oil, can say exactly what the costs will be.

"You can get some signals from the short term," what future expenses might be, Searle said. "You do your best work to estimate costs, but it's a moving target."

The frontier environment of the pipeline route and a shifting world economy have a potential effect to raise potential costs.

A shortage of skilled labour is just one worry.

At the peak of the three years of pipeline construction, Searle said up to 7,500 workers will be on the job - approximately equal to every man, woman and child in the Beaufort Delta.

"So we're talking about a large workforce," Searle said, which must be pulled together despite all the other construction projects, large or small, occurring throughout North America at that time.

"We want to draw on labour in the North, but you need a large number of people and need them at the same time," Searle said.

When it was suggested that Imperial might want to pressure the federal government to open the gates to let short-term immigrant labourers fill the gap, Searle said this: "Broadly speaking, we'd want to be in a position to consider all options, but that wouldn't be our first strategy."

Getting the North directly involved is important to Imperial, Searle said.

"More than just in terms of royalties and revenues, clearly we think it's good for us and good for the North to do what we can to hire locally," Searle said.