CALGARY, Alberta, Dec 24 (Reuters) - Imperial Oil Ltd has upped its cost estimate for the Mackenzie GasProject in Canada's far north by about 40 percent because ofrising prices for materials and labor, meaning the entireproject would cost more than C$20 billion ($18.82 billion) if itgoes ahead.
Imperial, 69.6-percent owned by Exxon Mobil Corp, said it has still not decided whether to proceed with thelong-delayed project given the weak state of the North Americannatural gas market.
Imperial is the lead company in the Mackenzie Gas Projectconsortium, which also includes ConocoPhillips, ExxonMobil Canada, Royal Dutch Shell PLC and the AboriginalPipeline Group.
"The Mackenzie Gas Project proponents have not yet made adecision to construct the project because of the current naturalgas market conditions," Imperial said in a filing to Canada'sNational Energy Board (NEB).
The project involves building a 1,196-kilometre (750-mile)pipeline system along the Mackenzie Valley in the NorthwestTerritories to link natural gas wells in the far north tosouthern markets.
It has been beset by delays and rising costs as well asconcerns about North American gas prices, which have dived inrecent years due to rapid development of shale supplies.
Imperial Oil said cost estimates for the gas-gatheringsystem and Mackenzie Valley pipeline have increased to a totalof C$16.1 billion, compared with a 2007 estimate of C$11.3billion.
That does not include the cost of developing three naturalgas anchor fields in the Mackenzie Delta on the Beaufort Seacoast, which in 2007 Imperial put at close to C$5 billion.
The company did not provide an updated total cost estimatefor the entire project but it would have to be more than C$20billion now, even if the gas-field estimate has not risen.
Imperial's 2007 estimate for the entire project was $16.2billion.
Increasing costs for materials and labor are problems thatcould haunt other major energy infrastructure projects beingproposed in Canada, including Enbridge Inc's NorthernGateway pipeline, which was given the green light by the NEBlast week.
The tight labor market in Western Canada, home to thecountry's vast oil sands, is a persistent headache for energyproducers building new oil and gas projects.