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Cost to complete Canada’s Trans Mountain Pipeline project soars to C$12.6 billion, up 70%

February 10, 2020

S&P Global Market Intelligence ($):

The projected cost of Trans Mountain Corp.’s plan to almost triple the capacity of its aging oil pipeline network has surged to C$12.6 billion from a last estimate of C$7.4 billion because of court-ordered changes and numerous delays.

The price tag for the 590,000-barrel-per-day expansion project has not been updated since 2017, before the Canadian government purchased the pipeline network from Kinder Morgan Inc. for C$4.5 billion in 2018, which included the existing 300,000-bbl/d network.

The revised cost included court-ordered accommodations to First Nations groups and benefits agreements with a larger number of nations, Trans Mountain CEO and President Ian Anderson said on a conference call. The company expected the expansion to be in service in 2022, a year behind its earlier schedule.

The company said its new estimate includes C$8.4 billion for construction and C$1.7 billion in financing costs, as well as C$600 million for contingencies. To date, about C$2.5 billion has been spent on the project. Trans Mountain now has benefit agreements with 58 First Nations groups along the pipeline route that will cost about C$500 million.

“The cost increase has really come about through two primary drivers, one being the starting and the stopping of construction, the costs of delay, the carrying costs, the additional regulatory and legal processes,” Anderson said on the Feb. 7 call. “The other being the many project changes and enhancements in market conditions that we face now in 2020 versus the [version] that was thought to be a project back in 2017.”

Houston-based Kinder Morgan sold the pipeline to the federal government after threatening to walk away from the expansion due to court challenges and challenges at other levels of government. Prime Minister Justin Trudeau authorized the C$4.5 billion purchase, claiming the outlet for oil exports was vital to the nation’s economy. The purchase set a value of about C$3 billion on the existing pipeline and C$1.5 billion for the expansion project. The increased cost estimate includes C$1.1 billion that Kinder Morgan had spent on the expansion before the purchase.

[Gene Laverty]

More ($): Trans Mountain cost soars 70% on court-ordered changes, delays

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