Cost estimate for Coastal GasLink pipeline soars 70 per cent to $11.2-billion – The Globe and Mail

The estimated cost of the Coastal GasLink natural gas pipeline in northern British Columbia has soared 70 per cent to $11.2-billion, but TC Energy Corp. TRP-T says it’s optimistic about completing construction by the end of 2023.

The project previously carried a price tag of $6.6-billion for the 670-kilometre pipeline, which is designed to transport natural gas from northeast B.C. to LNG Canada’s $18-billion export terminal, which is under construction in Kitimat, B.C.

Capital costs have risen from the original estimate because of design changes, the impact of COVID-19, weather and other events, TC Energy said in a statement on Thursday as part of its second-quarter financial results.

“We continue to believe the project remains economically viable,” said the statement from TC Energy, an energy infrastructure company that will operate the pipeline.

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 chief executive officer François Poirier said Coastal GasLink has resolved a dispute over pipeline costs with LNG Canada. “Our revised agreements with LNG Canada establish a better framework for project advancement and one that further strengthens our long-term partnership,” he said during a conference call with industry analysts.

The infrastructure company’s goal is to complete Coastal GasLink by late 2023, start testing the pipeline in 2024 and have Shell PLC-led LNG Canada start shipping liquefied natural gas in 2025 for export on Asia-bound tankers.

TC Energy plans to make a $1.9-billion equity contribution toward the pipeline, starting with its first instalment next month.

Denita McKnight, LNG Canada’s vice-president of corporate relations, welcomed TC Energy’s announcement about resolving 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 progress forward with a renewed focus on delivering the pipeline within the revised cost estimate, and to support LNG Canada’s first LNG cargo by the middle of this decade.”

The Coastal GasLink website says the pipeline has hit a milestone that shows 66 per cent overall progress, including engineering and procurement, with 58.5 per cent of construction completed. LNG Canada estimates that its Kitimat project is more than 60 per cent completed.

Calgary-based TC Energy posted an $889-million profit in the second quarter, down 9 per cent from the same period in 2021. Its quarterly revenue climbed 14 per cent year over year to $3.64-billion.

TC Energy concluded the sale of a 65-per-cent stake in the pipeline venture 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 set aside a 10-per-cent stake for the planned equity sale to as many as 20 elected First Nation councils along the pipeline route.

Those elected band councils have agreed to support the pipeline. But the Office of the Wet’suwet’en, a non-profit society that represents hereditary chiefs who oppose the pipeline, maintains that elected Indigenous leaders don’t have jurisdiction over the Wet’suwet’en’s traditional, off-reserve territory.

A group of Wet’suwet’en hereditary chiefs and their supporters have staged protests at Coastal GasLink construction areas near Houston, B.C., over the past four years.

John Ridsdale, a climate activist whose Wet’suwet’en hereditary chief name is Na’Moks, said such opposition to pipeline construction remains steadfast. “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 across British Columbia, while LNG Canada entered its busiest building schedule this spring, requiring up to 7,500 workers on rotation.

Costs related to the entire supply chain had been pegged at $40-billion, which includes $18-billion for LNG Canada’s first phase of the Kitimat export terminal and infrastructure that includes the pipeline, as well as drilling for natural gas in northeast British Columbia. But with the extra $4.6-billion now budgeted for pipeline costs, that increases the total to $44.6-billion.

The co-owners of the LNG Canada joint venture are pondering whether to approve Phase 2, which would double the 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 talks with LNG Canada are in a well-advanced stage over the prospect of the Kitimat expansion and any future pipeline upgrades such as new compressor stations that would be required.

“So we’re in active discussions with LNG Canada around Phase 2 and the feasibility, doing the appropriate front-end work to establish what the scope and scale of that project will be,” Mr. Wirzba said. “The combination of Phase 1 and Phase 2 brings us back into 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 timeline and scope for Phase 2. “Any final investment decision will take into account a range of factors, which include competitiveness, affordability, carbon intensity, technologies 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 operation mainly for domestic storage and has briefly exported only a small amount of LNG in containers.

Proponents of two export proposals on the East Coast, Pieridae Energy Ltd.’s PEA-T Goldboro LNG in Nova Scotia and Repsol SA’s Saint John LNG in New Brunswick, are studying the economics of shipping LNG to Europe, but face pipeline constraints in Central Canada and New England.

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