Exxon casts doubt on Arctic pipelines
Wed May 30, 2007 2:49pm ET
yahoo.reuters.com
DALLAS, May 30 (Reuters) - Exxon Mobil Corp. (XOM.N: Quote, Profile , Research) Chief Executive Rex Tillerson on Wednesday cast doubt on the viability of proposed pipelines in Canada and Alaska due to escalating costs.
Tillerson, speaking at a press conference following the company's annual meeting, said construction of the Mackenzie pipeline project in Canada was not viable at current cost levels.
"We are now in a situation where it's not economic at the current costs," Tillerson said, noting that prices for steel and other raw materials used to build the pipelines have surged in recent years.
He said he didn't know whether the Canadian government could create "enough room in the fiscal structure" to accommodate the rising costs.
"It may just be that this project is going to have to wait for a different cost environment," he said.
Earlier this year, costs estimates for the project, which is designed to ship natural gas from the Mackenzie River Delta in the Arctic Circle to Alberta, had more than doubled to about $14.8 billion.
The pipeline would carry 1.2 billion to 1.9 billion cubic feet of gas a day from three huge fields in the Mackenzie River Delta north of the Arctic Circle, and run 1,200 km (746 miles) south to Alberta.
Exxon Mobil has a 69.6 percent stake in Imperial Oil Ltd. (IMO.TO: Quote, Profile , Research), which is the leader of the project. It also has its own direct interest in the project.
Tillerson also said that although Exxon has not done any recent cost studies for a proposed pipeline in Alaska, he believes those costs would have risen dramatically as well.
Costs were between $22 billion and $25 billion about three years ago, when the company did its last estimate, Tillerson said.
Alaska has struggled for decades to come up with a workable plan to build a multibillion-dollar pipeline to ship the 35 trillion cubic feet of natural gas held in the North Slope to markets in the lower 48 states. |
