U.S. supermajor, ExxonMobil Corporation 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 BP and ConocoPhillips 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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Natural gas from the North Slope fields would be transferred by Alaska LNG, thereafter fuel would be liquefied at the facility on Cook Inlet for shipment to markets in Asia. According to a report published by Wood Mackenzie, the proposal would not be feasible at current LNG prices or even crude oil prices under $70 a barrel.

Alaska LNG targets production of about 20 million tons of LNG per year. This facility would surpass the 1.2 million-ton capacity of Alaska’s only operating LNG facility, which was built in 1969 and is operated by ConocoPhillips.

ExxonMobil currently carries a Zacks Rank #3 (Hold). A better-ranked player from the energy sector is Devon Energy Corporation DVN, which sports a Zacks Rank #1 (Strong Buy).

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