The estimated cost of the Coastal GasLink natural gas pipeline in northern British Columbia jumped 70 percent to $11.2 billion, but TC Energy Corp . TRP-T says it is optimistic to complete construction by the end of 2023.
The project previously had a $6.6 billion price tag for the 670-kilometre pipeline, which is designed to transport natural gas from northeastern British Columbia to LNG Canada’s $18 billion export terminal under construction in Kitimat, British Columbia
Capital costs have risen from the original estimate due to design changes, the impact of COVID-19, weather and other events, TC Energy said in a statement Thursday as part of second-quarter financial results.
“We continue to believe that the project remains economically viable,” TC Energy, the energy infrastructure company that will operate the pipeline, said in a statement.
TC Energy said it hopes LNG Canada will eventually expand its export capacity because that would improve Coastal GasLink’s financial performance.
For now, TC Energy CEO Francois Poirier said Coastal GasLink has resolved a pipeline cost dispute with LNG Canada. “Our revised agreements with LNG Canada create a better framework for the project to move forward and one that further strengthens our long-term partnership,” he said on a conference call with industry analysts.
The infrastructure company’s goal is to complete the Coastal GasLink by the end of 2023, begin pipeline testing in 2024 and have Shell PLC-led LNG Canada begin delivering LNG in 2025 for export by tanker. traveling to Asia.
TC Energy plans to make an equity contribution of $1.9 billion to the pipeline, starting with its first installment next month.
Denita McKnight, LNG Canada’s vice-president of corporate relations, welcomed TC Energy’s announcement to resolve their differences.
“LNG Canada and its joint venture participants have reached a commercial resolution with Coastal GasLink (CGL) to address CGL’s cost and schedule performance,” Ms. McKnight said in a statement. “This positive step allows both companies to move forward with a renewed focus on pipeline delivery within the revised cost estimate and to support the first LNG Canadian LNG cargo by the middle of this decade.”
Coastal GasLink’s website says the pipeline has reached a milestone that shows 66 percent overall progress, including engineering and supply, with 58.5 percent construction complete. LNG Canada estimates its Kitimat project is more than 60 percent complete.
Calgary-based TC Energy reported a profit of $889 million in the second quarter, down 9 percent from the same period in 2021. Its quarterly revenue rose 14 percent year over year to $3.64 billion.
TC Energy has completed the sale of a 65 percent interest in the pipeline in 2020 to Alberta Investment Management Corp. and KKR & Co. Inc.
TC Energy, which currently owns 35 per cent of Coastal GasLink, announced a deal in March to carve out a 10 per cent stake in the planned equity sale to 20 selected First Nations councils along the pipeline’s route.
These elected councils of groups agreed to support the pipeline. But the Office of the Wet’suwet’en, a nonprofit that represents hereditary chiefs who oppose the pipeline, argues that elected indigenous leaders have no jurisdiction over traditional territory outside the Wet’suwet’en reservation.
A group of Wet’suwet’en hereditary chiefs and their supporters have staged protests in the Coastal GasLink construction areas near Houston, British Columbia, for the past four years.
John Ridsdale, a climate activist whose Wet’suwet’en ancestral chief name is Na’Moks, said such opposition to pipeline construction remains unwavering. “There is no change,” he said in a text message to The Globe and Mail on Thursday.
Nearly 5,000 people are working this month on the pipeline in British Columbia as LNG Canada enters its busiest construction schedule this spring, requiring up to 7,500 workers on a rotating basis.
Costs associated with the entire supply chain were pegged at $40 billion, which includes $18 billion for LNG Canada’s first phase of the Kitimat export terminal and infrastructure, which includes the pipeline, as well as drilling for natural gas in northeastern British Columbia. But with the additional $4.6 billion now budgeted for pipeline spending, that brings the total to $44.6 billion.
Co-owners of the LNG Canada joint venture are considering whether to approve Phase 2, which would double export capacity to 28 million tonnes a year. LNG Canada has not indicated when it will make a final decision.
Coastal GasLink president Bevin Wirzba said negotiations with LNG Canada are well advanced on the prospect of the Kitimat expansion and any future pipeline improvements, such as new compressor stations, that will be needed.
“So we are in active discussions with LNG Canada around Phase 2 and feasibility, doing the appropriate preliminary work to establish what the scope and scale of this project will be,” Mr. Wirzba said. “The combination of Phase 1 and Phase 2 brings us back to a very competitive return scenario for the entire project.”
Ms. McKnight said LNG Canada and its co-owners, also known as joint venture participants (JVPs), are evaluating the schedule and scope of Phase 2. “Any final investment decision will take into account a range of factors that include competitiveness, affordability, carbon intensity, technology and individual JVP portfolio considerations,” she said.
LNG Canada is the only LNG export terminal under construction in the country.
Canada currently has no operational LNG export terminals. FortisBC’s Tilbury LNG plant in the Vancouver suburb of Delta is a small-scale, mainly inland storage operation and briefly exported only a small amount of containerized LNG.
Backers of two East Coast export proposals, Pieridae Energy Ltd.’s PEA-T Goldboro LNG. in Nova Scotia and Repsol SA’s Saint John LNG in New Brunswick are exploring the economics of shipping LNG to Europe but face pipeline constraints in central Canada and New England.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or evening. Sign up today.
Add Comment