The biggest energy story of the year?

In the last week of May, ExxonMobil’s CEO proposed shelving plans to build a natural gas pipeline from Canada’s Mackenzie Valley to the existing pipelines in Alberta, which continue down into the United States. The cost projections for the project have apparently shot up, in large part due to rising steel prices.   If the project ...

601238_Mackenzie_Map_05.jpeg
601238_Mackenzie_Map_05.jpeg

In the last week of May, ExxonMobil's CEO proposed shelving plans to build a natural gas pipeline from Canada's Mackenzie Valley to the existing pipelines in Alberta, which continue down into the United States. The cost projections for the project have apparently shot up, in large part due to rising steel prices.  

In the last week of May, ExxonMobil’s CEO proposed shelving plans to build a natural gas pipeline from Canada’s Mackenzie Valley to the existing pipelines in Alberta, which continue down into the United States. The cost projections for the project have apparently shot up, in large part due to rising steel prices.  

If the project ends up nixed or shelved, it could be a rather big deal. According to energy analyst Andrew Weissman, this is the “biggest energy story of the year” thus far. He told MarketWatch:

About 10% of our future natural gas supplies will disappear as a result…. It’s like we know there’s a hurricane coming into the Gulf of Mexico that will wipe out all the natural gas there. The gas will just sit in the ground.”

It’s clear the United States will need to import more natural gas. U.S. natural gas production has basically remained flat for the last decade, fluctuating between 511 and 555 billion cubic feet between 1996 and 2006 (PDF). Even if that number rises, it probably won’t offset the need for more imports.

Another big reason this story could (or should) get more attention is that natural gas is the main substitute for coal in electricity generation. Replacing coal with cleaner-burning natural gas is probably a good idea as Congress and presidential candidates consider policy options on climate change.

All that said, the talk about nixing the project could just be a negotiating tactic to get more Canadian government subsidies to build the pipeline. The Globe and Mail‘s initial report on ExxonMobil CEO Rex Tillerson’s comments make it seem as though a juicier subsidy package could change Tillerson’s mind. 

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