Coastal GasLink costs up another 30%, TC Energy says
Canadian energy infrastructure company TC Energy said February 1 it had raised the estimated cost of its Coastal GasLink (CGL) pipeline by another 30%, to C$14.5bn (US$10.9bn) from C$11.2bn.
The increase was foreshadowed by TC Energy at its annual investor day in November and follows a 70% increase announced in July 2022. Both cost increases are related to ongoing pressures including labour challenges, contractor underperformance and unexpected weather conditions and erosion and sediment control issues.
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“We are disappointed with the increase in the Coastal GasLink project costs,” TC Energy CEO Francois Poirier said. “We continue to be laser-focused on safely completing this critical piece of energy infrastructure at the lowest possible cost, which will enable Canada’s first direct path for LNG exports.”
The 670-km CGL pipeline, which in its first phase will move 1.8bn ft3/day of Montney natural gas to the 14mn metric tons/year LNG Canada liquefaction facility on BC’s northern coast with enough capacity to supply 300mn ft3/day to the proposed Cedar LNG project nearby, is 83% complete, CGL said in its latest project update in late January. Nearly 80% of the pipe has been laid, and nearly 5,600 workers are active along the eight construction sections.
“The entire route has been cleared, grading is more than 94% complete and over 485 km of the approximately 670 km pipeline has been backfilled with restoration activities underway in many areas,” TC Energy said.
The Wilde Lake compressor station, at the start of the pipeline route, is undergoing commissioning work, and natural gas is expected to be introduced to the facility in March, a significant milestone towards targeted mechanical completion by the end of this year.
“Once complete, Coastal GasLink will be Canada’s first direct link for LNG deliveries that will further support displacing 60-90mn mt/yr of CO2 emissions, an important step along the energy transition,” TC Energy said.
The cost review that led to the increase also considered the impact of extending construction well into 2024, in which event the total project would face a further C$1.2bn increase.
In light of the cost increase – which TC Energy will fund – the company will recognize an impairment to its equity investment in CGL in its Q4 2022 financial results, which will be released later this month.
TC Energy’s overall 2023 capital expenditure outlook has been revised to approximately C$11.5-C$12bn, reflecting the deferral of certain project spending, expected cost-saving initiatives and incremental funding requirements associated with CGL.