Trans Mountain Says Shippers Are Mostly Shielded From Cost Rise

Just 20% to 25% of the cost increases will be passed on through higher tolls to the companies that will be shipping oil on the line, the company said in an email Wednesday. Tolls will be filed with the Canada Energy Regulator shortly before the pipeline begins service.

“Trans Mountain will continue to be a competitive alternative for the export of oil to Asia taking into account both the toll shippers will pay and transit time,” the company said.

The operator of the government-owned pipeline announced last Friday that the cost of the line’s expansion project increased to C$21.4 billion ($16.7 billion) and the completion date was pushed back by almost a year until the third quarter of 2023.

Companies including Suncor Energy Inc., Cenovus Energy Inc., Exxon Mobil Corp.’s Imperial Oil Ltd. and PetroChina Co. have reserved about 80% of the space on the Trans Mountain expansion by signing commitments to ship on the line for 15 to 20 years, contracts that have underpinned the project for almost a decade. On Friday, Suncor and Cenovus issued statements saying that they continue to support the project after costs increased.

The Trans Mountain Expansion will add almost 600,000 barrels a day of new export capacity to the sole pipeline running from Alberta’s oil sands to Canada’s Pacific Coast, opening up easy access to growing markets in Asia for the country’s heavy crude, most of which now goes to the U.S. But the project has faced fierce opposition in British Columbia, cost increases and repeated delays since first proposed almost a decade ago. In 2018, the government stepped in to salvage the expansion project by purchasing Trans Mountain after the previous owner, Kinder Mogan Inc., threatened to pull the plug on it.

The Canadian government said on Friday that it will spend no additional public money on the project, and that Trans Mountain will instead secure the funding necessary to complete the project with third-party financing, either in the public debt markets or with financial institutions. BMO Capital Markets and TD Securities have been hired to provide advice on financial aspects of the project.