TC Energy ‘disappointed’ as Coastal GasLink faces increased construction costs

North America’s energy infrastructure company TC Energy has updated cost estimates for the Coastal GasLink project, a pipeline that is expected to transport natural gas to the approved LNG Canada facility near Kitimat, British Colombia, Canada.

TC Energy said in the update that the project continues to face material cost pressures that include challenging conditions in the Western Canadian labour market; shortages of skilled labour; impacts of contractor underperformance and disputes; as well as other unexpected events like drought conditions and erosion and sediment control challenges.

After a comprehensive cost and schedule risk analysis (CSRA), the company’s estimate of the costs to complete the project has increased to approximately $14.5 billion, excluding potential cost recoveries and incorporating contingencies for certain factors that may be outside of its control such as labour conditions, contractor performance and weather-related events.

TC Energy expects to fund the incremental revised project costs and is actively pursuing cost mitigants and recoveries that may partially offset a portion of these costs, some of which may not be conclusively determined until after the project is in service.

The company added that Coastal GasLink is working closely with its prime contractors on implementing productivity improvement strategies targeting mechanical completion by year-end 2023, with commissioning and clean-up work continuing into 2024 and 2025.

As explained, the CSRA review also considered the potential impact of an extension of construction well into 2024. In that event, costs would increase further by up to $1.2 billion.

“We are disappointed with the increase in the Coastal GasLink Project costs. 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”, said TC Energy President and CEO François Poirier.

“The project will provide substantive benefits for indigenous and local communities across the project route, our customers, the Western Canadian Sedimentary Basin, as well as playing a vital role in enabling global energy security and emissions reduction contributing to global climate goals.”

So far, the Coastal GasLink has reached approximately 83% overall completion with the entire route cleared. Grading is more than 94% complete and over 485 kilometres of the approximately 670-kilometre pipeline has been backfilled with restoration activities underway in many areas.

Moreover, the Wilde Lake Compressor Facility has commenced commissioning work with the introduction of natural gas expected in March, representing another significant milestone in reaching TC Energy’s targeted mechanical completion later this year.

Once complete, Coastal GasLink will be Canada’s first direct link for LNG deliveries that will further support displacing 60 to 90 million tonnes of CO2 emissions annually.