The company behind the controversial Coastal GasLink pipeline that runs through northern British Columbia says it has reached a “milestone” settlement with the group that is building a liquefied natural gas terminal on the west coast.
Amid growing global demand for fossil fuels, TC Energy Corp. CEO Francois Poirier said he signed an agreement with LNG Canada “which resolves all outstanding disputes” and allows “the safe and timely execution of our largest LNG-related project”.
The 670-kilometre pipeline, which aims to transport natural gas across the province to LNG Canada’s processing and export facility in Kitimat, is about 70% complete, he said.
TC Energy expects “mechanical completion” — when all construction and testing is complete and the tubes are ready to move chilled gas — by the end of 2023.
Details of the settlement are not disclosed, but it relates to costs arising from causes as diverse as COVID-19, weather, the “scope” of the project and “other events beyond Coastal Gaslink LP’s control,” it said. TCEnergy.
The new pipeline cost estimate is $11.2 billion, up from $6.6 billion projected a year ago.
“Together with LNG Canada, this project will provide the first direct route for Canadian natural gas to reach global LNG markets,” said Poirier.
The project has encountered political and environmental obstacles in recent years.
A series of protests by members of the Wet’suwet’en Nation and other Indigenous and environmental groups has repeatedly stalled progress along parts of the pipeline, while two fines from the government of Columbia Britons caught the company for failing to comply with environmental ordinances this year.
TC Energy has reached agreements with the 20 elected councils of First Nations along the route and signed option agreements earlier this year for the potential sale of a 10% interest to two Aboriginal groups representing 16 of those communities, Poirier noted during a conference call.
He also alluded to the energy turmoil caused by Russia’s invasion of Ukraine in February, saying global LNG demand is expected to grow 50% to 75 billion cubic feet per day by 2030, against 50 billion currently.
“This growth is largely supported by heightened energy security concerns and the reorganization and reorientation of the energy mix,” he said.
“This next wave of LNG demand creates significant opportunities that align with our strategy. TC Energy’s unprecedented asset footprint will play a critical role in securing the world’s energy supply.
However, analyst Robert Kwan of RBC Capital Markets questioned whether the returns from the pipeline would be more modest than the initially expected returns, “which I believe were quite low to begin with.”
“Phase 1 clearly did not meet its original performance targets,” responded Bevin Wirzba, TC Energy’s pipeline manager. “But as we’ve indicated, reaching a settlement puts the project in the best position to move forward.”
Phase 1 of the project includes the construction of the pipeline, while phase 2 involves more than doubling its capacity through the installation of compressor stations.
TC Energy, which owns 35% of the company, sold a 65% stake to Alberta Investment Management Corp. and KKR & Co. Inc. in 2020.
The Calgary-based company posted lower quarterly earnings on Thursday, saying net income attributable to shareholders fell to $889 million or 90 cents per diluted share in the second quarter from $975 million or $1 per share a year ago. earlier.
The pipeline operator‘s comparable earnings were $979 million or $1 per common share, down from $1.04 billion or $1.06 per share in the same period of 2021.
Revenue for the three months ended June 30 increased to $3.64 billion from $3.18 billion in the same quarter last year.
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