Estimated cost of Coastal GasLink pipeline surges to $14.5-billion

Cost estimates for building the Coastal GasLink pipeline A project in northern British Columbia, uncertainty remains as to when the route will be completed.

Calgary-based TC Energy Corp. TRP-T said on Wednesday it had raised its projected cost of Coastal GasLink to $14.5 billion. That’s up nearly 30% from his previous estimate of $11.2 billion last year, and up 134% from his original price of $6.2 billion in 2018.

BC Project co-owner TC Energy said it hopes to complete the natural gas pipeline by the end of this year, but prices could jump another $1.2 billion if construction activity is extended until next year. warned of the possibility.

Coastal gas links are facing cost pressures from a shortage of skilled labor, addressing “underperformance” in work done by some subcontractors, and challenges related to soil erosion and sediment mitigation. said TC Energy.

The 670-kilometer pipeline is designed to transport natural gas from northeastern BC to LNG Canada’s $18 billion export terminal under construction in Kitimat, BC.

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TC Energy shares fell $3.22 on the Toronto Stock Exchange on Wednesday to close at $54.11 per share.

“The market remains concerned about further project cost overruns,” Scotia Capital analyst Robert Hope said in a research report. Given the uncertainty about the final cost and when construction will be completed, he added, “the project is not out of the woods yet.”

Coastal GasLink’s goal is to test the pipeline next year and have it ready to supply LNG Canada in 2025, when exports of liquefied natural gas are expected to begin from Kitimat to Asia.

TC Energy CEO François Poirier said in a news release: “We remain focused on completing this critical energy infrastructure safely and at the lowest possible cost, which will enable a direct path to Canada’s first LNG exports. increase.”

TC Energy said it had strong interest in a previously announced plan to sell $5 billion in various assets and said its sale program could be expanded.

When LNG Canada co-owners approved construction of the Kitimat terminal in the fall of 2018, Prime Minister Justin Trudeau estimated the total investment at $40 billion, including Coastal GasLink’s initial estimate of $6.2 billion. Since then, pipeline cost projections have surged by $8.3 billion.

The total cost of Phase 1 of LNG Canada takes into account the $18 billion Kitimat terminal and various infrastructure, including a $14.5 billion revised estimate for pipelines, and an annual budget for drilling at North Montney. So at least $48.3 billion.region of northeastern BC

TC Energy completed the sale of its 65% stake in the pipeline venture to Alberta Investment Management Corp. and KKR & Co. Inc. in 2020.

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TC Energy, which currently owns 35% of Coastal GasLink, secured a 10% stake last year for a planned stake sale to up to 20 First Nation councils elected along the pipeline route announced a contract to TC Energy now plans to record an impairment charge on its stake in the pipeline project when it reports its fourth quarter results on February 14th.

TC Energy has already told investors that it will incur financial losses on this project, but the severity of the claim is a reflection of how much the company will reduce pipeline costs by charging higher fees to its customers. It may depend on recovery, Clark-Williams said. – Seattle-based analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), Delhi.

Williams-Derry estimates that the cost of transporting natural gas across British Columbia on the Coastal Gaslink project could be twice the cost of transporting fuel from northeast BC to the Gulf of Mexico. doing.

A new IEEFA report finds Canadian independent producers an attractive market for sending supplies of natural gas rather than relying on plans by British Columbia LNG advocates to export them overseas from Canada’s west coast. As such, we can increasingly look to the U.S. Gulf Coast.

Details, such as how exactly the increased pipeline costs will be distributed, have yet to be determined. “LNG Canada continues to monitor cost and schedule developments for Coastal GasLink. While we are unable to disclose details, commercial agreements have been signed to address risk allocation,” he said. said in a statement.

Kitimat Terminal is located in the traditional territory of Hyslana Nation. A controversial pipeline route of about 190 kilometers traverses the traditional territory of the Wetsweten Nation. Hereditary chieftains opposing Coastal GasLink say they have jurisdiction over the territory.

London-based Shell PLC redaf is LNG Canada’s largest partner with a 40% stake, followed by Malaysia’s PETRONAS. PNAGFMore at 25 percent.Other co-owners are PetroChina PCCYF (15%), Mitsubishi Corporation of Japan. MSBHF (15%) and South Korea’s Kogas (5%).

LNG Canada’s co-owners are weighing whether to proceed with a Phase 2 expansion plan that will double its export capacity for liquefied natural gas.

Five proposals for tanker-based exports remain active in BC, including possible expansions at Kitimat’s LNG Canada and Delta’s Fortis BC’s Tilbury LNG domestic plant. His other three projects are Cedar LNG, Ksi Lisims LNG and Woodfibre LNG.