ExxonMobil Corp. CEO Rex Tillerson Wednesday said the proposed Mackenzie Delta natural gas pipeline is "not economic at the current costs." The near-term possibility of an Alaska gasline also is in doubt because of escalating service and raw materials costs.
Tillerson, who presided over the company's annual shareholder meeting, said prices for steel and other raw materials used to build pipelines have risen in recent years, which would make it less likely that a gas pipeline from the Arctic to the Lower 48 states would be built anytime soon.
"It may just be that this project is going to have to wait for a different cost environment," Tillerson said of the Mackenzie pipe. Cost estimates for the pipeline recently more than doubled to nearly US$15 billion (see Daily GPI, May 21).
ExxonMobil is majority stakeholder in Imperial Oil Ltd. (69.6%), leader of the Mackenzie Gas Pipeline group. Imperial also holds a direct interest in the project. The 746-mile pipe would carry 1.2-1.9 Bcf/d from three gas fields in the Mackenzie River Delta to Alberta pipeline interconnects.
ExxonMobil has not done any recent cost studies on the proposed Alaska gasline, but Tillerson said he suspects costs for that project also have risen. Three years ago, ExxonMobil estimated costs for the Alaska pipe of $22-25 billion, but the state is putting the cost at closer to $30 billion. The Alaska Legislature earlier this month adopted Gov. Sarah Palin's Alaska Gasline Inducement Act, which outlines plans for the state to seek proposals for the pipeline (see Daily GPI, May 21).
Separately, Tillerson took on a cavalcade of shareholder complaints at the meeting regarding ExxonMobil's global climate change initiatives. Most of the questions at the meeting concerned ExxonMobil's commitment, or lack thereof. However, Tillerson defended the company and said ExxonMobil had never set out to become "public enemy No. 1."
Asked to explain why the oil major had not invested in alternative energies at the same rate as many of its energy peers, Tillerson said, "There's much we know and much we don't know" about climate change. Because of the uncertainties, ExxonMobil is funding research to ascertain the best way forward.
"Why do people feel so threatened about having a debate?" he asked. He acknowledged that global warming had been documented. However, he said there is still debate on how to temper it. "We don't fund junk science."
ExxonMobil's business remains centered on oil and natural gas, and the company's technology investments are focused on carbon sequestration and measures to reduce the environmental impact of fossil fuels.
"We're actively participating in the discussions around various policy options," Tillerson said. "We haven't picked a winner yet. It's very complex in terms of issues around how it'll impact the economy in the United States and the economy of other countries." Without knowing the outcome, investing in risky alternatives could amount to "betting the farm."
Despite the complaints, however, none of the shareholder resolutions about climate change, including a move to oust the chair of the company's public issues committee, claimed a majority vote. Several major shareholders, including the California Public Employees Retirement System, had attempted to oust board member Michael J. Boskin for not meeting with shareholders about climate change issues.
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