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Growth in U.S. Oil and Gas Output Slows Down

Growth in U.S. Oil and Gas Output Slows Down

This year's increase in shale…

Southern Co.’s Billion Dollar Nuclear Conundrum

Southern Co. would benefit financially from completing delayed nuclear reactor projects instead of abandoning the $7.4 billion plans, according to a new report by Bloomberg.

CEO Tom Fanning said cancelling the Vogtle project would leave the company with nothing to show for its massive capital investment. A final decision on the future of the project, which would cost $6.3 billion to cancel, is still pending.

The $7.4 billion price tag would become a reality if work continues into March 2023.

“There’s a host of qualitative issues that go into this decision,” Fanning said in an interview this week. The future regulatory environment as well as high natural gas prices could affect the desirability of the planned plant.

A cancelled Vogtle project will trigger cancellation fees in current contracts and challenge American leadership in the international nuclear power game, the CEO said.

“They’ve got the conundrum of having spent billions of dollars,” Glenrock Associates analyst Pail Patterson told Bloomberg over the phone. “That’s why abandonment in the middle of a project usually looks unattractive.”

Southern Co. also recently abandoned a coal-gasification plant project in Mississippi, which countered President Donald Trump’s plans to increase clean coal’s grip on the American energy mix.

Related: The Only Way OPEC Can Kill U.S. Shale

In the last 20 years, the U.S. has seen only one new nuclear reactor that is functional, constructed by a government entity – the Tennessee Valley Authority. Further, the Nuclear Regulatory Commission shows that there are only four reactors currently under construction in the entire country. Two would be at the Alvin W. Vogtle station in Georgia, and two at the Virgil C. Summer plant in South Carolina.

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These projects are implementing reactors manufactured by Westinghouse. Construction on all four are currently delayed over three years and are billions over-budget. Westinghouse itself was one of the last private companies to be commissioned for the manufacture of nuclear reactors – before over-budget, inefficient projects such as these pushed them into ruin. So far, Westinghouse remains committed to completing the projects. 

By Zainab Calcuttawala for Oilprice.com

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