Cost of TC Energy pipeline project soars

The estimated cost of the Coastal GasLink pipeline has increased by 29 per cent to $14.5 billion, as the company behind the project continues to be dogged by unexpected construction issues and rising labour costs.

Calgary-based TC Energy Corp. released the new price tag, up from an earlier estimate of $11.2 billion, for the project on Wednesday.

The $11.2-billion figure, announced by the company last July, was itself a significant increase from an earlier cost projection of $6.6 billion.

“We are disappointed with the increase in the Coastal GasLink Project costs,” TC Energy chief executive François Poirier said in a release.

“We continue to be laser-focused on safely completing this critical piece of energy infrastructure at the lowest possible cost.”

The Coastal GasLink project is a 670-km pipeline spanning northern British Columbia. It will carry natural gas across the province to the LNG Canada processing and export facility in Kitimat, B.C.

Construction of the pipeline is 83 per cent complete and TC Energy hopes to complete the project by the end of this year. However, the company warned Wednesday that if construction extends into well into 2024, it could add up to an additional $1.2 billion to the project’s cost.

TC Energy — which warned at its investor day in November that it was anticipating a material increase in the cost of the project — said it has run into a host of problems including a shortage of skilled labour; contractor underperformance and disputes; as well as other unexpected events like drought conditions and erosion and sediment control challenges.

While the company said it is pursuing potential recoveries from contractors to offset a portion of the rising costs, it will recognize an impairment to its equity investment in Coastal GasLink in its fourth-quarter 2022 financial results.

TC Energy said its overall 2023 capital expenditure outlook has been revised to approximately $11.5 to $12.0 billion, reflecting the deferral of certain project spending, expected cost-saving initiatives and incremental funding requirements associated with Coastal GasLink.

In an emailed statement, LNG Canada said it continues to monitor Coastal GasLink’s cost and schedule developments.

“While we cannot disclose specifics, a commercial agreement is in place that addresses risk allocation,” the statement said.

LNG Canada is a joint venture between Shell plc, Petronas, PetroChina, Mitsubishi and the Korea Gas Corporation.

The estimated cost of the Coastal GasLink pipeline has increased to $14.5 billion, Calgarybased TC Energy Corp. said