CALGARY, Alberta Dec 24 Imperial Oil Ltd
has upped its cost estimate for the Mackenzie Gas
Project in Canada's far north by about 40 percent because of
rising prices for materials and labor, meaning the entire
project would cost more than C$20 billion ($18.82 billion) if it
Imperial, 69.6-percent owned by Exxon Mobil Corp,
said it has still not decided whether to proceed with the
long-delayed project given the weak state of the North American
natural gas market.
Imperial is the lead company in the Mackenzie Gas Project
consortium, which also includes ConocoPhillips, Exxon
Mobil Canada, Royal Dutch Shell PLC and the Aboriginal
"The Mackenzie Gas Project proponents have not yet made a
decision to construct the project because of the current natural
gas market conditions," Imperial said in a filing to Canada's
National Energy Board (NEB).
The project involves building a 1,196-kilometre (750-mile)
pipeline system along the Mackenzie Valley in the Northwest
Territories to link natural gas wells in the far north to
It has been beset by delays and rising costs as well as
concerns about North American gas prices, which have dived in
recent years due to rapid development of shale supplies.
Imperial Oil said cost estimates for the gas-gathering
system and Mackenzie Valley pipeline have increased to a total
of C$16.1 billion, compared with a 2007 estimate of C$11.3
That does not include the cost of developing three natural
gas anchor fields in the Mackenzie Delta on the Beaufort Sea
coast, which in 2007 Imperial put at close to C$5 billion.
The company did not provide an updated total cost estimate
for the entire project but it would have to be more than C$20
billion now, even if the gas-field estimate has not risen.
Imperial's 2007 estimate for the entire project was $16.2
Increasing costs for materials and labor are problems that
could haunt other major energy infrastructure projects being
proposed in Canada, including Enbridge Inc's Northern
Gateway pipeline, which was given the green light by the NEB
The tight labor market in Western Canada, home to the
country's vast oil sands, is a persistent headache for energy
producers building new oil and gas projects.