09/11/2012 05:54 EDT | Updated 11/11/2012 05:12 EST

N.W.T. minister: Oil development could bode well for stranded natural gas

CALGARY - Development of a potentially huge oil deposit in the central Mackenzie Valley may bode well for long-stranded natural gas in the North, the Northwest Territories' industry minister said Tuesday.

David Ramsay said his territory hasn't given up on getting gas from fields near the coast of the Beaufort Sea to market, even though a proposal led by Imperial Oil Ltd. (TSX:IMO) to ship the gas south has effectively been shelved after years of delays.

As companies start developing oil in the Sahtu region of the Northwest Territories, it's likely some natural gas will come out of the ground along with it, Ramsay said in a telephone interview from Charlottetown following an annual meeting of energy ministers.

"One of the things that may happen there is the potential for another oil pipeline south from Norman Wells and the possibility exists for a gas line south from Norman Wells," said Ramsay.

"So it could potentially be the impetus to get Mackenzie gas to market."

Enbridge Inc. (TSX:ENB) currently operates an oil pipeline from Norman Wells, N.W.T. south to Zama, Alta., which is running part-empty. But eventually that might not be enough to accommodate production from the Canol formation, which is estimated to contain between two and three billion barrels of recoverable oil.

Ramsay noted the United States, by far Canada's biggest export market for energy, is rapidly developing its own domestic sources in areas like the Bakken in North Dakota and Montana.

A report this week from Bantek, a firm that analyzes energy data, predicts U.S. crude oil production will grow by 74 per cent in the next decade to an average of 11.6 million barrels per day.

"That window is going to close in that market — that's obvious. We have to look perhaps elsewhere," he said.

"As that resource is proven up and if there's as much oil there that people believe, we have to keep all of our options open."