By Paul Vieira

 

OTTAWA-Construction costs for a government-owned pipeline project designed to triple the amount of western Canadian crude destined for Asia-bound tankers has ballooned to roughly 30.9 billion Canadian dollars, or about four times the original cost.

The Trans Mountain Corp., which operates the pipeline project on behalf of the Canadian government, said in a Friday statement that the total cost of increasing pipeline capacity, to nearly 900,000 barrels of crude oil per day, is $22 billion. The company said construction is 80% complete and the expanded pipeline is expected to come into service in the first quarter 2024.

When Canada's Liberal government purchased the pipeline project from Kinder Morgan in May 2018 the estimated cost of the pipeline expansion was C$7.7 billion. Canada paid C$4.5 billion for the 710-mile pipeline, which Kinder Morgan sold due to political uncertainty regarding the project's completion.

Last year, Trans Mountain said construction costs had climbed 70% to roughly C$21 billion. Canada agreed to provide a C$10 billion loan guarantee to help secure financing, but also said the government would no longer provide direct funding to help the project.

In the Friday statement, Trans Mountain said the company is in the process of securing external financing to fund the remainder of the project. The higher costs, it added, are attributed to global inflation and supply-chain strains, challenging terrain in British Columbia, and unexpected archaeological discoveries, among other things.

The Canadian Parliament's budget watchdog said last year the government would likely record a net loss from the project once it is sold to private-sector interests. The analysis was done when the estimated cost to complete the pipeline was about C$21 billion, versus the new C$30.9 billion estimate.

 

Write to Paul Vieira at paul.vieira@wsj.com

 
 

(END) Dow Jones Newswires

March 10, 2023 16:43 ET (21:43 GMT)

Copyright (c) 2023 Dow Jones & Company, Inc.
Kinder Morgan (NYSE:KMI)
Historical Stock Chart
From Aug 2024 to Sep 2024 Click Here for more Kinder Morgan Charts.
Kinder Morgan (NYSE:KMI)
Historical Stock Chart
From Sep 2023 to Sep 2024 Click Here for more Kinder Morgan Charts.