Tuesday, November 23, 2010

Exxon Halts N.J. LNG Project

In a move that should surprise nobody, Exxon announced yesterday that it is suspending work on its planned Blue Water Energy LNG plant off the coast of New Jersey.

Why did it take so long to make the decision?  Seems like a no-brainer on the surface.  I can't say for sure, but I think it speaks to Exxon's belief in the potential for North American shale gas (as if its $36 billion acquisition of XTO Energy last year wasn't enough evidence) and in the viability of the Marcellus Shale.

Because of its concentrated population, remote coastal location and its high levels of gas use, the Northeast is one of the few areas of the U.S. that imports some natural gas from other countries.  The Marcellus Shale is the largest gas shale deposit in North America, but perhaps what makes it really attractive is its proximity to the Northeast gas markets.  But if exploration in the Marcellus is limited by local politics for more than a decade, an LNG port off the coast of New Jersey would make sense.  I guess not any more.

Exxon is a company that makes well-considered decisions, so I view this as another ringing endorsement of the future of shale gas.

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