TC Energy Sees Higher Costs for Troubled Coastal GasLink Pipeline
(Reuters) — North American pipeline company TC Energy Corp. on Tuesday said it faces another big cost increase of its troubled Coastal GasLink project, as it grapples with problems attracting workers and mountainous terrain that has forced it to move pipe with ski lifts.
First announced in 2018, the 670-km (416-mile) pipeline will transport natural gas to the Shell PLC-led LNG Canada facility on the west coast of British Columbia, Canada's first LNG export terminal.
Coastal has faced several construction delays, including COVID-19 disruptions and protests from environmentalists and some First Nations.
Project costs had prompted TC Energy to raise its 2022 capital expenditure forecast to about C$9.5 billion ($7.07 billion) in November. It now further expects "a material increase" in funding requirements due to rising labor costs and shortages.
"Coastal GasLink is one of the most complex projects, certainly in my career, that I've never seen before," said Bevin Wirzba, TC's executive vice-president in charge of Canadian natural gas pipelines, at its investor day in Toronto.
Along with finding unusual ways to move pipe, the need for measures to control erosion in a province that has seen both mudslides and drought has added to complexity, he said.
Wirzba blamed much of the problems on labor shortages and poor performance by contractors.
TC said it will provide a new cost estimate for Coastal GasLink, previously pegged at C$11.2 billion ($8.27 billion), early next year.
TC shares fell 3.7% in Toronto.
The Canadian government-owned Trans Mountain oil pipeline is also under construction in British Columbia, competing for workers.
Coastal's problems have in past caused tensions between TC and LNG Canada, but that relationship is now "extremely strong, Wirzba said. LNG Canada spokespersons could not be immediately reached.
The pipeline is 80% complete with mechanical in-service expected by the end of 2023, TC Energy said.
The company expects adjusted core earnings for 2023 to be 5% to 7% higher than in 2022.
About 95% of TC's projected adjusted core earnings are under long-term take-or-pay contracts which insulate it against rising inflation and interest rates, the company said.
TC earlier this month said it plans to sell C$5 billion worth of assets to repay debts and fund new projects.
($1 = 1.3441 Canadian dollars)
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