ExxonMobil Withdraws From Proposed LNG Facility In Alaska
Zacks Investment Research | Aug 29, 2016 09:09PM ET
U.S. supermajor, ExxonMobil Corporation (NYSE:XOM) , has decided against investing further in the proposed Alaska LNG facility as the project is slated to change into a state-owned endeavor.
The decision of the company is based on the oversupply of natural gas that has depressed prices. Also, the release of a Wood McKenzie report earlier this week that deemed the Alaskan project as “one of the least competitive” of proposed liquefied natural gas plants worldwide resulted in the move.
The project, known as Alaska LNG, is estimated to cost between $45 billion and $65 billion. In Nov 2015, the Alaskan government paid $65 million for the 25% stake TransCanada Corp. held in the project. While ExxonMobil holds about 33.3% in Alaska LNG, the other stake owners are BP plc (NYSE:BP) and ConocoPhillips (NYSE:COP) hold 20% each. These companies too have indicated their possibility of withdrawing from the project.
Notably, ExxonMobil has cited misalignment between the government and its partners – BP and ConocoPhillips – as the reason for withdrawing from the project.
The Alaskan governor had wanted to progress with the long-deferred project by acquiring a direct stake through the state-owned Alaska Gasline Development Corp (“AGDC”). However, ExxonMobil and its corporate partners pulled out of the project as the government’s efforts for the next stage comprised of an engineering and design study costing more than $1 billion in 2017, without a royalty and tax agreement.
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